MOT has introduced new regulations on the extension of lease period of tourism properties with specific reference to the fee charged in granting the extension.
The regulations gazetted on 9 June 2022 carry the citation Tourism Properties (Lease Extension Fee) Regulations [Regulations No: 2022/R-97]. These newly adopted regulations replace the old set of regulations brought out in 2010 by the name of Tourist Resorts (Lease Extension Fee) Regulations [Regulations No: 2010/R-7].
Scope of Applicability
Contrary to having a limited application to tourist resorts alone under the repealed regulations, these new regulations now have a wider scope of applicability by bundling together islands, land and lagoons under a common term called “tourism properties”.
The regulations are published under s52 of the Tourism Act to cater to the detailed mechanisms required in relation to matters provided in s9(c) and (g) of the Act.
As regards the applicability of these regulations, the tourism properties are divided into two broad categories: (i) those leased for a period less than 50 years; and (ii) those leased for 50 years.
Leases less than 50 years
If the original lease period of a tourism property at the date of these regulations is less than 50 years, the lessee having leasehold ownership of that property can now apply at its discretion to expand the lease period to a maximum of 50 years.
The lessee can decide the number of years it wants to add to the current lease period. It need not be for the maximum period. The choice remains with the lessee. However, the number of years chosen would be closely tied to the fee amount payable for the extension.
Once the number of years wanted by the lessee is decided, the lessee has the following payment options: (i) pay the fee amount in 6 installments before 27 December 2022; or (ii) spread the amount across the remaining lease period to be paid every year in quarterly installments.
The fee rate also will vary depending on the payment option chosen by the lessee. If the lessee wants to take the first option (to pay by 27 December 2022), the fee rate will be US$100,000 for every year sought in extension; and if the second option (of distributing it over the lease period) is chosen the fee rate will be US$200,000 for every year sought in extension.
Whatever may be the fee payment option chosen at the time of application, the lessee would always have the right to pay the full fee amount in one payment and pay that before 27 December 2022. Here, the lessee will pay the fee amount at the rate of US$100,000 per year sought in extension.
All payments ought to be made in United States Dollars to the Maldives Inland Revenue Authority.
Leases of 50 years
If the lease period of a tourism property at the date of these regulations is 50 years, the lessee of that property can apply to seek an additional 49 years to add to their current lease period – thereby converting the total lease period of the property to 99 years.
In making the application, the lessee must ensure that there are no payments due to the government in the form of lease rent, fees, taxes or fines (excluding those deferred under an agreement with the Ministry of Tourism); the tourism property is operational and open for business; and the whole of the extension fee is paid in one payment.
The fee amounts is specific and predetermined by law. There are two fee amounts provided in the law and tied to date of payment: US$5m (if paid by 26 December 2022) or US$10m (if paid after that).
On a successful application, the Ministry of Tourism will advise the applicant within 10 working days of the fee amount and conditions to be met. The applicant will have 30 days to make the payment and meet all conditions precedent.
If all of the conditions (including payment) are not met within the 30-day deadline, the application will collapse. If all those conditions are met, the lease agreement will be amended within 10 working days via an addendum to reflect the new position.
It is also important to note that the cutoff date to make payment to obtain 49 years for US$5m is 26 December 2022 (a day before the statutory deadline).
Photo: Courtesy of Mihaaru