New Forex Bill in the Maldives: What Businesses Need to Know

The Maldives Monetary Authority (MMA) announced a new Foreign Exchange (Forex) Bill on November 26th, 2024, seeking to replace the existing Forex Regulation implemented just last month on October 1st, 2024. The MMA invited the public to provide feedback on the proposed bill by 2:00 PM on December 1st, 2024.

Some of the key highlights of the bill are:

1. Exchange/Conversion of Foreign Currency:

• Applicable to:

  • Category A Tourism Establishments: tourist resorts, integrated tourist resorts, private islands, tourist hotels and similar registered establishments.

  • Category B Tourism Establishments: hotels in inhabited islands, tourist guesthouses and tourist vessels.

  • Businesses earning a minimum of US$20 million annually in foreign currency through provision of goods and services.

• How it works?

  • Category A Tourism Establishments would need to convert or exchange US$500 multiplied by tourists arrived in a particular month on the 28th of the third month following that month.

  • Category B Tourism Establishments would need to convert or exchange US$25 multiplied by tourists arrived in a particular month on the 28th of the third month following that month.

  • Businesses with an annual income of at least US$ 20 million are required to convert or exchange an amount set by the regulations to MVR by the 28th of the third month following that particular month. However, this amount should not surpass 25% of the foreign currency income for that specific month.               

• Exceptions

In determining tourist arrivals for the purpose of calculating the conversion amount, Category A and Category B tourist establishments can exclude:

• tourists staying for less than 24 hours;

• children under 2 years; and

• tourists are staying free of charge or on a complimentary basis.

2.  Deposit of Foreign Currency Earnings:

• Applicable to:

  • Tourism goods and service providers registered in MIRA; and

  • businesses with an annual earning of minimum US$20 million in foreign currency are eligible.

• How it works?

  • If the above parties haven't already registered, they must register at MMA within 10 days of the bill becoming law.

  • The above parties are to deposit or transfer its monthly realized sales proceedings in foreign currency to its bank account in Maldives by 28th of each third month following the month of that realized sales proceedings.

  • The above parties are to maintain their record for a period of 5 years following the date when the good or service was provided.

3. MVR Mandatory and MVR Exempt Transactions

While the bill makes it mandatory for all transactions in the Maldives to be conducted in MVR, it does provide a list of exceptions to this rule. These exceptions are:

• international transactions;

• payments to be made to Government authorities mandated to be paid in foreign currency under law; and

• tourism-related goods and services.

• Financial services offered to customers by banks, financing companies and insurance companies

• transactions between remittance service providers and their clients

• foreign currency-earning businesses paying dividends to shareholders and salaries and other expenses of the staffs

• Selling shares of the foreign currency-earning businesses

Furthermore, when formulating regulations under this law, the MMA retains the discretion to grant more exemptions.

4. Enforcement

Once the bill becomes law, MMA will have greater authority to enforce it by collaborating with the Maldives Inland Revenue Authority (MIRA) for investigations. During investigations, the Bill also grants MIRA extensive authority to utilize all their powers outlined in Chapter 3 (Audit and Investigation Powers) of the Tax Administration Act .

5. Penalities

The Bill also introduces penalties for non-compliance. Here are the fines:

· Conversion Obligation Breaches: A fine of 0.1% from the amount to be converted and a daily fine capped at 0.1% of the amount to be converted until compliance.

·  Deposit & Transfer Breaches: A fine of 0.05% from the amount to be deposited and a daily fine capped at 0.05% of the amount to be deposited until compliance.

·  Other Breaches: Fine ranging from MVR 10,000 to MVR 1,000,000, based on the severity of the breach.

5. Implementation Timeline:

The bill is expected to be enacted into law and come into force by 1st January 2025. Until then, the existing Regulation on Foreign Currency remains in effect.

What This Means for You:

If your business operates in the Maldives and deals in foreign currency, it is crucial to understand these changes and how they might impact your operations. We recommend seeking legal advice to ensure compliance.