Restoring 10% Tax on Foreign Contractors Will Level Playing Field: Urban Development Minister

Minister of Infrastructure, Housing and Urban Development Abdulla Muththalib has said restoring the 10 percent withholding tax on payments to foreign contractors is an important step towards addressing an imbalance that has disadvantaged Maldivian contractors.

In a post on X, Muththalib said a 2021 amendment that reduced the withholding tax rate from 10 percent to 5 percent gave foreign contractors a significant tax advantage over local companies.

“On 20 July 2021, former President Ibrahim Mohamed Solih ratified an amendment reducing withholding tax on payments to foreign contractors from 10% to 5%. This gave overseas contractors a significant tax advantage over local contractors,” he said.

Muththalib said restoring the rate to 10 percent would help create a more level playing field for Maldivian contractors.

His remarks come as Parliament began debate today on a government-sponsored bill proposing to increase the withholding tax on payments made by Maldivian businesses to non-resident contractors from 5 percent to 10 percent.

The bill to amend the Income Tax Act was introduced on behalf of the government by Mathiveri Constituency MP Hassan Zareer.

According to the bill, the proposed change is intended to improve the competitiveness of Maldivian contractors bidding against foreign companies for construction projects in the Maldives.

The government estimates that the increase in the withholding tax rate will generate an additional MVR 251 million in annual state revenue.

Withholding tax is deducted from payments made by Maldivian businesses to foreign contractors and remitted to the Maldives Inland Revenue Authority (MIRA).

The bill proposes to amend Section 55 of the Income Tax Act to increase the applicable rate from 5 percent to 10 percent, along with consequential amendments to other provisions of the law.