Channel Licensing Fees Not Subject to WHT

On 24 October 2018, the Tax Appeal Tribunal decided, by way of majority decision, in favor of the Appellant, Medianet Pvt Ltd – the largest cable TV operator in Maldives – and set an important precedent with respect to the interpretation of Section 6(a)(1) of the Business Profit Tax Act.

The Tribunal, with a majority of four to one, held that channel licensing fees will not be subject to WHT under Section 6(a)(1) as the scope of the Section does not extend to payments made for the use of intangible property to be subject to WHT. The Tribunal broke down the constituent parts of the Section that were in dispute and found that even though “royalty” is a form of payment recognised under Section 6(a)(1), “Rent, royalties and any other such consideration..” must be paid for the use of the types of  tangible property stated in Section 6(a)(1). Though the MIRA had argued that the term “other property” in Section 6(a)(1) included intangible property, the Tribunal applied the Rule of interpretation, ejusdem generis and stated that the meaning of the term “other property” must be drawn from the preceding terms – plant, machinery, equipment – which are all tangible property.

The Tribunal in its decision, ordered the MIRA to refund the assessed amount to the Appellant within 30 days of the decision.