MNACI Backs Plan to Raise Foreign Contractor Tax to 10 Percent

The Maldives National Association of Construction Industry (MNACI) has expressed strong support for the government's proposal to increase the withholding tax on foreign contractors from 5 percent back to 10 percent. The move aims to eliminate a tax disparity that has disadvantaged local firms for several years. Under the administration of former President Ibrahim Mohamed Solih, the withholding tax for foreign contractors was reduced to 5 percent in July 2021. This reduction created a significant tax advantage for international firms, allowing them to operate with lower overhead costs than their Maldivian counterparts, which MNACI argues skewed the competitive landscape. To rectify this imbalance, Member of Parliament Hassan Zareer has proposed an amendment to the Income Tax Act to restore the original 10 percent rate. This legislative change is designed to create a more equitable "level playing field," ensuring that local contractors are not undercut by foreign competitors due to tax incentives. In a statement shared on X, MNACI described the restoration of the tax rate as a positive shift for the industry and thanked the government for addressing the grievance. Minister of Infrastructure, Housing and Urban Development Dr. Abdulla Muththalib echoed this sentiment, stating that the adjustment would restore equality and open fairer income opportunities for Maldivian construction firms. Beyond the impact on industry competition, the policy change is expected to provide a significant boost to the national treasury. The Maldives Inland Revenue Authority (MIRA) estimates that returning the tax rate to 10 percent will increase government revenue by an average of USD 16.2 million annually. The proposal now moves toward formal adoption through the amendment of the Income Tax Act, marking a strategic pivot toward protecting domestic industry interests while strengthening state fiscal capacity.