MMA Overhauls Forex Regulations: Four Things to Know
Just yesterday, Maldives Monetary Authority (MMA) revamped its 37-year-old foreign exchange regulations with the introduction of the new Regulations on Foreign Currency Transactions. The new regulations determines transactions that can be done in foreign currency and deals with the matters relating to foreign exchange rate.
Some of the key highlights of the Regulations are:
1. MVR Mandatory and MVR Exempt Transactions
The Regulations makes it mandatory for all transactions in Maldives except for exempted transactions to be conducted in MVR or domestic currency. This includes payment for goods and services, payment of rent, payment or receipt of salary and fees and charges.
However, it does not mandate the use of MVR or domestic currency in certain transactions. These include:
Receipt or payment in foreign currency allowed to be paid to Government authority under any law or regulation
International transactions
Receipt of foreign currency in consideration of tourism goods and services; and
If a company earning income in foreign currency wishes to do so, it can pay employee salary and benefits in foreign currency.
If MVR mandatory transactions are conducted in USD or other foreign currency, it will give MMA the right to impose a fine between MVR 10,000 to MVR 1,000,000.
2. Deposit of Income received in Foreign Currency
The tourism good and service providers are now required to deposit or transfer its monthly realized sales proceedings (in USD or MMA approved currency) to its bank account.
This is to be done before 28th of each third month following the month of that realized sales proceedings.
3. Exchange of Foreign Currency Received
The Regulations require tourist establishments to exchange a certain amount of foreign currency to MVR via banks.There are two categories of tourist establishments mentioned in the Regulations.
Category A establishments are tourist resorts, integrated tourist resorts, resort hotel, hotel, tourist vessel and similar establishments required to pay green tax.
Category B establishments are tourist guesthouses and hotels in inhabited islands (with 50 or less rooms) required to pay green tax.
Category A Establishments would need to exchange total of the US$500 per tourist arrived each month. The exchange of the foreign currency to MVR via bank is to take place before 28th of the third month following that particular month.
The same applies for Category B Establishments but the rate for them is US$25 per tourist arrived each month.
However, if the Category A Establishments or Category B Establishments feel that such exchange or conversation can cause difficulty in paying tax required to be paid in foreign currency, paying loans from financial institutions to be paid foreign currency, making court mandated payments in foreign currency, they can request MMA for leniency and MMA may lessen the amount to be exchanged or converted.
4. Registration Requirement
Tourism good and service providers already registered with MIRA are required to register with MMA by 31 October 2024.
Those tourism good and service providers being registered with MIRA post 1 October 2024 are also required to register with MMA within 30 days from their registration at MIRA.
Those failing to do so may attract a fine between MVR 5000 and MVR 1,000,000. There is also a discretionary daily fine imposed by MMA not exceeding MVR 5000 (in total) until completion of registration with MMA by the tourism goods and services provider.
For in-depth legal advice regarding the new regulations, please reach out to our experienced team.
