A Maldives Limited Liability Company (LLC) offers foreigners total ownership with limited liability and a business profit tax rate of 5% on their earnings from outside of the country. Most foreigners choose the LLC as the type of company they prefer to form in Maldives.
Background
The Maldives is an island country located in South Asia near India and Sri Lanka. It is situated on the Indian Ocean near the Arabian Sea. It is officially known as the “Republic of Maldives”.
It gained its independence in 1965 from the United Kingdom after becoming a British Protectorate in 1796. As a result, English is its second official language.
Its political system is described as a “unitary presidential constitutional republic”. It has a democratically elected legislature and a president.
The main economy is tourism.
Benefits
A Maldives Limited Liability Company (LLC) offers the following benefits:
• 100% Foreign Shareholders: Foreigners can own all of the shares in the LLC.
• Limited Liability: A shareholder’s liability is limited to his or her contribution to the share capital.
• Low Taxes: The business profits tax is 5%, there are no personal income taxes. However, U.S. taxpayers and all other paying taxes on global income must report all income to their governments.
• Low Minimum Capital: Current minimum share capital is $130 USD.
• English: After nearly 170 years as a British Protectorate, English is its second official language.
Maldives Limited Liability Company (LLC) Name
Every LLC must select a company name not resembling any other company’s name in the Maldives. Possible company names may be reserved with the government before making an application to register the LLC.
The Registrar of Companies must approve the selected name before an application to register can be made.
LLC’s are called “Private Limited Companies” and use the suffix of: “Pvt Ltd” where either the complete term or the suffix is to be used at the end of the company name.
Limited Liability
Shareholders’ liabilities are limited to their contributions to the share capital.
Registration
The Companies Act of 1996 requires that all new companies register with the Ministry of Economic Development (hereinafter called the “Registrar”).
The Registrar of Companies is where all documents are filed to register a new LLC. The documents include: the name search approval form, a formal application, copies if the Memorandum and the Articles of Association, and acceptance letters from the company’s secretary and the managing director.
It may take up to one week for approval by the Registrar.
Memorandum and Articles of Association
The United Kingdom and nearly every one of its former colonies requires new companies to prepare and file with the local government’s Registrar a Memorandum and its Articles of Association in order to become legally registered as a company.
A Memorandum is officially called the “Memorandum of Association” of a company. It contains the conditions and procedures for which a company operates. The purpose for the company is also included. The Memorandum allows creditors, shareholders, and third parties to know what the company is about and how it operates. It basically regulates a company’s external affairs.
The Maldives Registrar states that the following information needs to be in a Memorandum:
• Company name;
• Designation whether the company is private or public;
• Registered office address;
• Purpose and objectives for the company;
• Declaration that the company is a limited liability one for its shareholders (members);
• Amount of authorized capital and manner paid;
• Shareholders’ names, addresses, and number of shares issued; and
• Witnesses signatures and details of identity.
The Articles of Association are also known as a company’s “Articles of Incorporation” in some countries. Together with the company’s Memorandum they form a company’s constitution. It defines the powers, duties, and responsibilities of the directors, the types of business activities the company will engage in, and the ways the shareholders exert their control over the board of directors.
The Maldives Registrar states that the following information needs to be included in the Articles of Association:
• Company name;
• Quorum of the Board of Directors (50% + one member) and how they manage the company;
• Statement that no shares will be sold to the public;
• Transfer of shares may only be done after approval by the Board of Directors;
• Number of shareholders (maximum of 50);
• Shareholders’ names, addresses, number of shares issued;
• Names and addresses of the Board of Directors; and
• Signatures of the witnesses along with their names and addresses.
Shareholders
At least two shareholders of any nationality and living anywhere are required to form the LLC. The maximum number of shareholders is 50.
Directors
A minimum of two directors must be appointed. It is recommended to appoint three to avoid tie votes on important matters. The three directors will form the Board of Directors to manage the company.
Officers
A company secretary must also be appointed to represent the company to third parties and to file all necessary documents required by the government.
Registered Agent and Office
A local registered agent must be appointed whose office (or that of the company secretary) can be used as the registered office address for the company.
Minimum Capital
The minimum authorized capital is 2,000 MVR ($130 USD in July of 2017).
Taxes
While Maldives does not have a personal income tax, it does have a corporate tax called the “business profit tax” at a 15% rate. This was established by the Business Profit Tax Act of 2011. However, this rate only applies to companies (whether resident or non-resident) doing business in Maldives.
Maldives companies gaining profits from outside of the country pay a business profit tax rate of 5%.
Note: Even with only paying a 5% tax rate, U.S. taxpayers like everyone subject to taxation of their worldwide income must still notify their tax authorities regarding all earned income.
Annual tax returns are required to be filed with the government’s tax authorities.
Accounting
Acceptable international standards for preparing books and account records will be used. Annual audits are not required. Financial statements do not need to be filed.
Annual General Meetings
An annual meeting of the shareholders is required. The meeting may be held anywhere in the world.
Public Records
Since the shareholder’s names are filed with the Registrar, they become part of the public records.
Time for Formation
It is estimated that it may take one week for the registration process and approval.
Shelf Companies
Shelf companies are not available in Maldives.
Conclusion
A Maldives Limited Liability Company (LLC) has the following benefits: 100% ownership of the shares by foreigners, 5% business profits tax rate, low minimum capital, limited liability, and English is an official language.
