Maldives being a part of MAAC will boost investor and donor confidence, says FM Shahid

Foreign Minister Abdulla Shahid stated that Maldives being a part of the Convention on Mutual Administrative Assistance in Tax Matters (MAAC) establishes the trust of the international community on the nation's tax administration, enabling more loans to be issued to the country.

Maldives signed the Convention on August 11, with Maldives Ambassador to Belgium and the European Union (EU) Hassan Sobir signing on behalf of the government at the signing ceremony held at Organization for Economic Cooperation and Development (OECD) Headquarters in Paris.

Tweeting in relation to this, Foreign Minister Shahid said that he was "delighted" that Maldives is now party to the Convention on Mutual Administrative Assistance in Tax Matters and added that this is an "excellent demonstration" of incumbent President Ibrahim Mohamed Solih's policy "to strengthen trust in Maldivian tax administration and boost investor and donor confidence".

Following the signing of the Convention, Maldives signed two Competent Authority Agreements which specify the methods for exchanging information. These agreements are the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS-MCAA) and the Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports (CbC-MCAA).

While Maldives became a member of the Global Forum on Transparency and Exchange of Information on Tax Matters (Global Forum) in February 2016, MIRA in a statement noted that it has since been constantly working to implement the international tax standards with the assistance of the Global Forum, an international body involving a total of 160 countries and financial tax centers collaborating to increase transparency of tax systems in order to limit tax evasion and avoidance on a global scale.

Under the agreement, an international legal regime is established that respects the basic rights of taxpayers in exchanging information and cooperation in tax matters. Various forms of administrative cooperation such as exchange of information on request (EOIR), automatic exchange of financial information (AEOI), spontaneous exchange of information (SEOI), service of documents and assistance for overseeing tax examinations will be given to the signatories of the convention in order to stand against those who are non-compliant.

Being part of the MAAC, under the Common Reporting Standard (CRS), MIRA will be able to access financial information of Maldivian tax residents that own financial accounts in countries that are a part of this Convention. This includes information of financial accounts of all individuals and accounts of organizations with a value of more than USD 250,000 which are maintained by Financial Institutions of the participating jurisdictions. It is to be highlighted that this is of great importance as tax residents of Maldives are taxed on their worldwide income. Thereby, having access to financial information in 143 countries further supports MIRA’s attempts to prevent tax evasion and also helps identify those who have not been completely honest about their incomes.

Moreover, under Country-by-Country Reporting (CbCR), MIRA will also have access to financial information of Multinational Enterprises (MNE) with a combined revenue of EURO 750 million that have component establishments based in the Maldives and operate in jurisdictions of member countries.

As the deal is reciprocal, Maldives is also required to provide intel to tax authorities and participating powers about information they had previously agreed on. The information exchanged with foreign parties will be submitted to MIRA by the financial institutions registered under the Common Reporting Standard and CbCR regulation. The first deadline for submission for these MNE’s is 31st July 2022. Organizations required to file Country-by-Country reports in Maldives were to file for Reporting Fiscal Years from January 1st 2021 and no later than 12 months after the last day.

MIRA noted that it has has worked closely with the Tax Policy Unit of the Finance Ministry in order to establish necessary laws and polices so that this international commitment by the Maldives would be implemented.

MIRA said it will need the support of financial organizations registered under CRS and establishments that are required to file country-by country reports, for this to be a success. Penalties for being unable to provide information to MIRA will be determined under Section 65 of the Tax Administration Act.

The authority said this is "an important milestone for MIRA and the Maldivian tax system," as the country has joined developed and developing nations in the global attempts to curb tax evasion and avoidance.