High Court Confirms TAT Ruling on Third Party Payments

The High Court of Maldives has upheld the Tax Appeal Tribunal’s decision on a case which focused on the subjectivity of withholding tax on payments made by a person other than the taxpayer.

On 23 November 2016, the High Court of Maldives upheld the Tax Appeal Tribunal’s decision on the case Aishath Asima v MIRA. The appeal case decided by the High Court was filed by a taxpayer, Aishath Asima, who initially filed an appeal with the Tax Appeal Tribunal to contest the MIRA’s decision to impose withholding tax on payments made by her husband to a non-resident party for the advertisement and promotion of her guest house business.

The High court, by unanimous decision, upheld the majority view of the Tax Appeal Tribunal, citing that a close enough nexus can be established between the person who made the payment and the business. Documents submitted by the taxpayer to the MIRA’s audit also show that the payment was made for the advertisement of the business. Though the payment subject to withholding tax was not made by the Taxpayer per se, the payment made by her husband, in his capacity as manager, for the advertisement and promotion of her business, constitutes a payment subject to withholding tax under Section 6 of the BPT Act, which is payable by the taxpayer.