The Income Tax Bill has been ratified.

While President Ibrahim Mohamed Solih signed the bill on Tuesday, People’s Majlis passed the Income Tax Bill on 4 December.

Upon ratification, the law has been publicized in the government gazette and will come into effect from 1 January 2020.

While the bill was passed with the amendments brought by the house’s sub-committee, those who earn over MVR 60,000 a month are subject to tax. Prior to the amendment, the minimum income rate was set at MVR 40,000.

According to the bill, Income Tax is imposed on the earnings and profits of a business through local and foreign companies. It is set to be imposed on salary and wages, business profit, revenue from leasing current assets and non-current assets, dividends, interest, annuity, pension, retirement benefits, salary of beneficiaries, technical service fees, commissions, royalties, capital gains from disposal of current assets and non-current assets, shares and other business investments and other sources of income.

The tax rates are zero percent for those who earn below MVR 720,000, 5.5 percent for those who earn between MVR 720,000 – 1,200,000, eight percent for MVR 1,200,000 – MVR1,800,000, 12 percent for MVR 1,800,000 – MVR 2,400,000 and 15 percent above MVR 2,400,000.

The tax rates are zero percent for those who earn less than MVR 60,000, 5.5 percent for those who earn between MVR 60,000 and MVR 100,000, eight percent for MVR 100,000 - MVR 150,000, 12 percent for MVR 150,000 to MVR 200,000 and 15 percent for those who earn over MVR 200,000.

Further, rates are to remain unchanged at 25 percent for banks on profits, with taxes of 15 percent of profits exceeding MVR 500,000 to be levied on partnerships and business corporations.

The new law also enforces Business Profit Tax and Bank Profit Tax and abolishes the Land Sales Tax, Tax levied from the revenue of Petroleum Companies and the Remittance Tax.

The state budget for 2020 estimated a revenue of MVR 600 million through taxes. However, this amount is expected to rise due to the amendments brought to the rate determined for the minimum income of MVR 60,000.

Minister of Finance, Ibrahim Ameer earlier revealed that increasing the minimum income rate will bring losses to the country.

The bill was submitted to parliament by Ungoofaaru constituency MP Mohamed Waheed and was accepted by parliament on 19 November.

Introducing the bill was included in the government’s campaign pledges, President Ibrahim Mohamed Solih had stated that it is necessary to “bridge the gap between rich and poor and to complete the taxation system introduced by the Maldivian Democratic Party (MDP)’s government”.