Expanding a business is the ultimate goal of entrepreneurs, and a great way to establish a business is to organize a subsidiary or branch office in the Maldives. Although Maldives is known as a tourist spot, the government of Maldives has taken practical steps to develop it into a business-friendly nation.
With time, Maldives has progressed immensely in attracting foreign investors and entrepreneurs. According to the Doing Business reports, Maldives bags the 50th position regarding ease of doing business. The whole process of incorporation of a wholly owned subsidiary in the Maldives is governed by the Business Registration Act.
To make the nation a business hub, the government of Maldives focuses on providing a statutory environment and optimum policies for conducting business. However, setting up a subsidiary in Maldives requires following some compliances. Here is a detailed guideline for conducting subsidiary business in the Maldives.
What are the Types of Subsidiaries in the Maldives?
Prior to setting up a subsidiary company in the Maldives, it is necessary to be familiar with the types of subsidiaries as mentioned below:
Private limited company
- Formed by two members
- The maximum number of members should be at most 50.
- Must be mentioned in the article of association and memorandum
- Prohibition of the sale of shares to the public
- Share transfers only under the article of association
- Must have two directors
- Must have a minimum share capital of MVR 2,000
Public limited company
- Can be formed with at least ten members
- No upper limit in terms of the number of members
- Must be stated in the articles of association and memorandum
- Must have at least five directors
- Fully paid shares can be freely transferred
- Can sell shares to the public under the law
- The minimum share capital must be MVR 1,000,000
How to Set Up Subsidiaries in Maldives?
The subsidiary company formation in Maldives is an uncomplicated process that is broken down into the following steps:
Step 1: Choose a unique company name
- First and foremost, choose a company name that is not registered with the Registrar of Companies.
- This registration of names can be done both offline and online. While the offline process gives you instant results, the online mode may take 24 hours.
Step 2: Pay company registration fees
- The Ministry of Economic Development takes responsibility for collecting fees.
- Companies must pay MVR 2,000 as a company fee and MVR 500 for stamp duty and registration fees.
Step 3: Register and apply for Tax Identification Number
- To register the company with the Companies Registrar, you must submit some valid documents.
- The whole process of registration does not take more than a week, provided you submit all the documents correctly.
- Upon registration approval, you will get a tax identification number to create a corporate bank account for company transactions.
Benefits of Setting Up a Maldives Subsidiary
The benefits of a subsidiary company in the Maldives are highlighted below:
- A transparent legal system and stable economy promoted by the government of Maldives
- Beneficial investment incentives that encourage foreign investors
- Tax benefits that eliminate tax barriers and avoid double taxation
- Easy visa entry after government approval
Documents to Prepare When Opening a Subsidiary in Maldives
The document checklist for incorporation of foreign subsidiaries in Maldives is as follows:
- Company registration application form
- Name search approval form
- Copies of the memorandum of association
- Copies of the article of association
- Acceptance letter from the managing director and company secretary
- National identification card copies of shareholders, directors, and company secretary
- A company status document with complete annual fees
What Business Forms can Maldives Subsidiaries Take?
According to the Maldives Company Act, foreign entrepreneurs and investors can set up private or public limited companies. Both legal and natural persons can open these companies. Foreign investors generally choose limited liability companies in the Maldives, where they need to pay a tax of 5% on their earnings from outside the country.
Maldives Subsidiary Laws
The Business Registration Act guides every business in the Maldives. The Companies Act prescribes businesses in the Maldives. For foreign investors and entrepreneurs, businesses must be registered under the Companies Act.
The kind of business you do can demand a work permit issued by the Maldivian government. You can continue the business activities only after receiving the permit or license from the government. After company incorporation, the two vital documents that validate your business are the incorporation certificate and tax identification number. This number helps you create a corporate bank account in the company’s name.
Post-Incorporation Compliance
Now that you know how to register a subsidiary company in Maldives, here are two vital post-incorporation compliances that complete the process.
Prepare a company seal
According to the Companies Act of 1996, every company should prepare and register a company seal with the Registrar of Companies.
Since this is a subsidiary, you can proceed with the parent company’s seal and register it with the Registrar of Companies.
Company seal registration
Entrepreneurs can register the company seal with the Registrar of Companies online via the Business Portal.
The online procedure does not take more than 24 hours. However, same-day in-person registration is also possible.
Taxes on Subsidiaries in Maldives
According to the Maldivian government, the taxation of foreign subsidiaries in Maldives does not apply to all. The statutory corporate tax for companies is 15%. However, companies must pay this tax only if their annual income exceeds MVR 500,000.
Tax Incentives for Companies Setting Up a Subsidiary in Maldives
A foreign tax credit applies to subsidiary businesses in the Maldives. According to the Special Economic Zones Act, investors and entrepreneurs get tax holidays and tax exemptions if they invest in Special Economic Zones.
Some other incentives offered to foreign investors include the following:
- 100% foreign ownership
- No restriction on foreign exchange
- Guaranteed legally backed investment
- Repatriation of earnings devoid of any restrictions
- Complete freedom to use foreign technical, managerial, and unskilled labor
- Long-term contractual agreement
Other Important Considerations
For opening a subsidiary in the Maldives, you must have a registered office address where the authority can reach out to you. For company registration in Maldives, the government follows Foreign Investment Laws. After setting up a subsidiary in the Maldives, register all your employees with the Pension Administration Office.
How Can Multiplier’s Employer of Record Help You Hire & Expand in the Maldives?
While setting up a subsidiary in Maldives, it is crucial to have a detailed understanding of the laws and legislations of the country. Here, you can collaborate with global EOR services like Multiplier. The Multiplier team is adept at searching for the right talents for you without setting up a subsidiary. This way, you can test new markets and set up teams in new countries at an affordable rate.