Overall findings
The Maldives’ legal framework implementing the AEOI Standard is not in place in accordance with the requirements of the AEOI Terms of Reference. While the Maldives’ international legal framework to exchange the information with all of the Maldives’ Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has significant deficiencies in areas that are fundamental to the proper functioning of the AEOI Standard. Most significantly, the Maldives’ legislative framework does not define some categories of Financial Institutions in line with the AEOI Standard, does not define some terms that are essential to the due diligence requirements and has an incomplete enforcement framework.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall determination on the legal framework: Not In Place
Conclusions on the legal framework
General context
The Maldives commenced exchanges under the AEOI Standard in 2022.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the Maldives relies on:
Sections 51-2, 51-3 of the Tax Administration Act; and
Chapter 14 of the Tax Administration Regulations as of 9 March 2023.
Under this framework Reporting Financial Institutions were instructed to commence the due diligence procedures in relation to New Accounts by 1 January 2021. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete due diligence procedures on High Value Individual Accounts and on Lower Value Individual Accounts and Entity Accounts by 31 December 2021.
With respect to the exchange of information under the AEOI Standard, the Maldives has the Convention on Mutual Administrative Assistance in Tax Matters in place and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2022.
Detailed findings
The detailed findings for the Maldives are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (www.oecd.org/tax/transparency/documents/aeoi-terms-of-reference.pdf).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Determination: Not In Place
The Maldives’ domestic legislative framework is not in place as required as it does not contain several key aspects of the CRS and its Commentary. Significant deficiencies have been identified in relation to the scope of Reporting Financial Institutions required to report information (SR 1.1), the scope of Financial Accounts required to be reported and the due diligence procedures to be applied (SR 1.2), the information required to be reported (SR 1.3) and the framework to enforce the requirements (SR 1.4). Most significantly, the Maldives’ legislative framework does contain some of the key due diligence timelines, does not fully define some categories of Financial Institutions, does not define some terms that are essential to the due diligence requirements in a manner that is binding on Financial Institutions and has incomplete sanctions as part of its enforcement framework.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
The Maldives has not defined the scope of Reporting Financial Institutions in its domestic legislative framework in a manner that is consistent with the AEOI Standard and its Commentary as significant deficiencies have been identified. Most significantly, the Maldives’ legislative framework:
does not provide for the definitions of Investment Entity and the term “managed by” in accordance with the requirements; and
does not contain rules for determining the residency of a trust that is a Financial Institution and of a fiscally transparent Financial Institution (other than a trust).
The scope of Reporting Financial Institutions is material to the proper functioning of the AEOI Standard.
Recommendations:
The Maldives should amend its domestic legislative framework to ensure that the residency of (i) a trust that is a Financial Institution and (ii) a fiscally transparent Financial Institution (other than a trust) is determined in accordance with the AEOI Standard.
The Maldives should amend its legislative framework to ensure that the term Investment Entity is defined in accordance with the AEOI Standard.
The Maldives should ensure that the interpretation of Investment Entity is required to be consistent with similar language defining “Financial Institution” in the FATF Recommendations.
The Maldives should amend its domestic legislative framework to include the definition of “managed by” in relation to the definition of Investment Entity.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
The Maldives has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. Most significantly, the Maldives’ legislative framework:
does not provide for the terms “current” and “change of circumstances” in accordance with the requirements;
does not include definitions of the terms “Controlling Persons”, “NFE”, “Active NFE”, “Passive NFE” and “Related Entity” as required;
does not align with the definition of Financial Account in the AEOI Standard and does not incorporate the further definitions for Depository Account, Custodial Account, Equity Interest, Insurance Contract, Cash Value Insurance Contract and Cash Value; and
does not incorporate the definitions of “Related Entity” and “Documentary Evidence” as required.
The scope of Financial Accounts and the due diligence procedures to identify them are material to the proper functioning of the AEOI Standard.
Recommendations:
The Maldives should ensure that the whole of the definition of the term “current”, as set out in the Commentary to the AEOI Standard, is incorporated into its domestic AEOI framework.
The Maldives should ensure that the term “change of circumstances” is defined and applied in line with the Commentary.
The Maldives should amend its domestic legislative framework to ensure that Financial Institutions always collect, review and report information on Controlling Persons in accordance with the definition in the AEOI Standard.
The Maldives should amend its domestic legislative framework to ensure that all terms relevant to identifying Financial Accounts, including “Depository Account”, “Custodial Account”, “Equity Interest”, “Insurance Contract”, “Annuity Contract”, “Cash Value Insurance Contract” and “Cash Value”, are incorporated in accordance with the AEOI Standard.
The Maldives should amend its domestic legislative framework to ensure that “Reportable Jurisdiction Person” and “Participating Jurisdiction” are defined in accordance with the AEOI Standard.
The Maldives should amend its domestic legislative framework to ensure that the definition of “Controlling Person” is incorporated in accordance with the AEOI Standard and its Commentary.
The Maldives should amend its domestic legislative framework to include the definitions of (i) “NFE”, (ii) “Active NFE” and (iii) “Passive NFE” as required by the AEOI Standard.
The Maldives should amend its domestic legislative framework to include the definition of “Related Entity” as required by the AEOI Standard.
The Maldives should amend its domestic legislative framework to include the definition of “Documentary Evidence” as required by the AEOI Standard.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
The Maldives has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
Recommendations:
No recommendations made.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
The Maldives does not have a legislative framework in place to enforce the requirements in a manner that is consistent with the CRS and its Commentary as significant deficiencies have been identified. More specifically, the Maldives’ legislative framework:
does not include rules to prevent Financial Institutions, persons or intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures;
does not contain provisions imposing sanctions on Account Holders and Controlling Persons for the provision of a false self-certification;
does not include rules requiring Reporting Financial Institutions to maintain records in accordance with the AEOI Standard;
does not provide the relevant authorities with the power to access the records and evidence relied upon held by Reporting Financial Institutions in relation to the due diligence procedures applied;
does not impose sanctions for failing to carry out the due diligence procedures required by the AEOI Standard,
does not provide for an explicit basis to enforce sanctions for non-compliance by any legal arrangement that is a Reporting Financial Institution;
includes sanctions for failing to report, incorrect reporting and failing to keep records but which are calculated with reference to tax payable by the person for a tax period, which may not be applicable in all relevant cases; and
does not include measures to ensure that valid self-certifications are always obtained and validated for New Accounts.
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard.
Recommendations:
The Maldives should amend its legislative framework to introduce an anti-avoidance provision in accordance with the Standard.
The Maldives should ensure that it has rules in its domestic legislative framework that impose sanctions on Account Holders and Controlling Persons for providing false self-certifications.
The Maldives should amend its domestic legislative framework to provide the appropriate authorities with the power to access to records and evidence relevant to verifying and enforcing the AEOI Standard.
The Maldives should ensure that it has rules in its domestic legislative framework to require relevant records to be kept for at least 5 years after the end of the period within which the Reporting Financial Institution must report the information required to be reported, rather than 5 years after the end of the calendar year to which the records relate.
While the Maldives is able to impose penalties for failing to report, for reporting incorrect information and for failing to keep the required records, it is recommended to amend its legislative framework to ensure it is able to also impose penalties for failing to carry out due diligence.
The Maldives should amend its legislative framework to ensure that it is able to sanction non-compliance by any Reporting Financial Institution, including those that are legal arrangements or have no tax liability for the period of non-compliance.
The Maldives should introduce measures to ensure that valid self-certifications are always obtained and validated for New Accounts.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Determination: In Place
The Maldives’ international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of The Maldives’ Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from The Maldives and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
The Maldives has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
Recommendations:
No recommendations made.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
The Maldives put in place its exchange agreements without undue delay.
Recommendations:
No recommendations made.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
The Maldives’ exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Recommendations:
No recommendations made.
Comments by the assessed jurisdiction
No comments made.