MALDIVES INLAND REVENUE AUTHORITY Malé, Republic of Maldives

Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives

Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: info@mira.gov.mv, Website: www.mira.gov.mv

D R A F T T A X R U L I N G

Reference Number: 220-PR/TR/2012/C3

Date: 09 February 2012

To: All GST Registered Persons

Subject: GST treatment of reimbursements and disbursements

Excerpt from the Goods and Services Tax Act

39. If a registered person receives in relation to a good or service supplied by him, monies

received as reimbursements, judgments of a court, arbitral awards or out of court

settlements, which are subject to tax in accordance with this Act, then such person

shall pay tax to the extent of such amount received.

1. Where a registered person bills another person to recover expenses they have incurred on

the other person’s behalf, the GST treatment of the amount re-billed shall depend on who

receives the good or service, who is legally liable to pay for it and to whom the tax

invoice is made out. For convenience, this ruling distinguishes between “reimbursements”

and “disbursements” of expenditure.

2. For a transaction to be regarded as a reimbursement, which requires GST to be added to

the amount on-charged by the registered person, under Section 39 of the GST Act, the

supply to which the payment relates shall meet all of the following conditions:

(a) A tax invoice for that supply is issued to the registered person who re-bills the

amount.

(b) That registered person is the recipient of the supply.

(c) The registered person is legally liable to make the payment for that supply.

3. Where Section 2 of this Ruling applies, the registered person may claim input tax on that

transaction.

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Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives

Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: info@mira.gov.mv, Website: www.mira.gov.mv

4. Where a re-billed amount meets all of the following conditions, it shall be regarded as a

disbursement and GST shall not be charged on the amount re-billed:

(a) A tax invoice for the supply is NOT issued to the registered person who re-bills the

amount.

(b) The registered person is NOT the recipient of that supply.

(c) The registered person is NOT legally liable to make the payment for that supply.

5. Where Section 4 of this Ruling applies, the registered person shall not claim input tax on

that transaction.

6. Notwithstanding Section 4 of this Ruling, where a registered person charges a

commission, fee or similar charge in addition to the amount of the reimbursement or

disbursement, the registered person shall add GST to that commission, fee or other such

charge.

7. The following examples illustrate the application of the above provisions.

(a) A lawyer, who is a registered person, bills his client for the recovery of printing

expenses of MVR 50 (excluding GST) which he incurred to facilitate the provision of

his legal services to the client. His fee for the legal services is MVR 1,000 (excluding

GST).

The transaction between the supplier and the lawyer, and the lawyer and the client are

two separate supplies. The on-charging of the MVR 50 is a reimbursement charge.

The lawyer must charge 6% GST on the total of the invoice (MVR 1,050) raised to

the client. Since the supplier is also a registered person, the lawyer may claim input

tax on the amount of GST paid by him to the supplier. The lawyer has the tax invoice

to support the claim.

(b) A clearing agent pays import duties of MVR 5,000 to the Maldives Customs Service

on behalf of an importer. The agent then recovers that amount from the importer by

raising an invoice for it plus a commission for his service (MVR 500 excluding GST).

Client Lawyer

(Registered

person)

Supplier

(Registered

person) Payment of

MVR 53 Payment of MVR

1,113

Tax Invoice for

MVR 50 + GST

Tax Invoice for

MVR (1,000 + 50) + GST

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Maldives Inland Revenue Authority, T-Building, Ameenee Magu, Male’ 20379, Maldives

Tel: (960) 332 2261, Fax: (960) 331 6577, E-mail: info@mira.gov.mv, Website: www.mira.gov.mv

In this example, the clearing agent is recovering his disbursement. He must not charge

GST on the re-billed amount to recover the amount of import duty (MVR 5,000) paid

to Customs. However, 6% GST must be charged on the commission (MVR 500)

charged by the clearing agent.

(c) Your company is the parent company of a group of companies. Your audit firm bills

one of your subsidiary companies MVR 20,000 (excluding GST) for the annual audit

of its financial statements. Your company pays the fee and subsequently recovers it

from the subsidiary company, together with charging your quarterly management fee

of MVR 50,000.

In this example, you must not charge GST on the re-billed amount to recover your

disbursement payment of the audit fee (MVR 21,200). The subsidiary company may

claim an input tax credit for the GST of MVR 1,200. It has the tax invoice to support

the claim. However, you must charge 6% GST on the management fee (MVR

50,000).

Audit firm

(Registered

person)

Tax Invoice for

MVR 20,000 +

GST

Payment of

MVR 73,000

Payment of

MVR 21,200

Tax Invoice for

MVR (50,000 +

GST) + 20,000

Parent

company

(Registered

person)

Subsidiary

company

(Registered

person)

Maldives

Customs Service

(Not a registered

person)

Invoice for MVR

5,000 (No GST)

Payment of

MVR 5,530

Payment of

MVR 5,000

(No GST)

Tax Invoice for

MVR (500 +

GST) + 5,000 Clearing

Agent

(Registered

person)

Importer