Parliament has passed a bill to increase withholding tax on payments made by Maldivian businesses to non-resident contractors from 5 percent to 10 percent.

The bill, submitted by Mathiveri MP Hassan Zareer, passed with 54 votes in favour and two against.

According to the bill's introduction, the amendment aims to create a level playing field for local contractors competing with foreign contractors for construction projects in the Maldives.

The bill estimates that the increase will generate an additional MVR 251 million in annual state revenue.

Withholding tax is levied on payments made by Maldivian businesses to non-resident contractors. The tax is withheld by the business making the payment and paid to the Maldives Inland Revenue Authority (MIRA).

The bill amends Article 55 of the Income Tax Act to increase the withholding tax rate from 5 percent to 10 percent, along with related provisions.