The Maldives Inland Revenue Authority (MIRA) has issued a Tax Ruling on January 14, 2024 which focuses on the deductibility of donations under Section 21 of the Income Tax Act.
Overview of the Tax Ruling
The MIRA's recent tax ruling specifically addresses the interpretation of Section 21 of the Income Tax Act, which pertains to allowable deductions related to donations. This section highlights that donations made in monetary form by a taxpayer to a State institution or a charitable organization approved by the Commissioner General may be deducted when computing taxable income for the relevant accounting period.
Key Points from Section 21 of the Income Tax Act
Section 21 of the Income Tax Act stipulates that, notwithstanding other sections of the Act, monetary donations made to approved State institutions or charitable organizations are eligible for deduction in the computation of taxable income. This has been a historical practice.
MIRA's Clarification and Changes
However, the recent Tax Ruling by MIRA introduces a noteworthy change in practice. Effective from March 1, 2024, MIRA clarifies that, for the purpose of computing taxable income, only monetary donations will be deductible under Section 21 of the Income Tax Act. This marks a departure from previous practices, where deductions were allowed irrespective of the form of the donation.
Implications for Taxpayers
It is recommended that individuals and businesses liable to income tax carefully review their donation practices to ensure compliance with the updated regulations.
Effective Date and Compliance
This ruling takes effect from March 1, 2024.
References