Parliament has passed an amendment to the Income Tax Act that doubles the withholding tax imposed on payments made to foreign contractors working on construction projects in the Maldives.

The amendment, submitted on behalf of the government by PNC MP Hassan Zareer, was approved with 54 votes in favor.

Of the 56 members present during the vote, two voted against the proposed changes.

Under the existing Income Tax Act, payments made to foreign contractors are subject to a 5 percent withholding tax.

The newly approved amendment increases the rate to 10 percent when a Maldivian business makes payments to a foreign contractor for construction-related work.

The government has said the measure is intended to create a more equitable and competitive environment for companies bidding for and undertaking construction projects in the Maldives.

Withholding tax is collected directly by the party making a payment, which deducts the required amount and remits it to the state before transferring the remaining funds to the recipient.

The tax applies to certain income earned in the Maldives by non-resident individuals and entities.

t is commonly imposed on payments such as royalties, technical service fees, dividends, and contractual payments, helping ensure that income generated within the country by foreign entities contributes to state revenue.

The amendment now moves forward under the legislative process following its approval by Parliament.