Forex regulation comes into effect

The law requiring tourist businesses to convert USD 500 per tourist, which was recently introduced, has come into effect.

President Dr. Mohamed Muizzu ratified the Foreign Currency Bill on 14 December 2024.

On 29 November 2024, the new bill was drafted and made public with relaxations to the regulation that the Maldives Monetary Authority (MMA) imposed abruptly without any consulting with relevant stakeholders, requiring tourist service providers to mandatorily convert foreign currency.

The newly formulated "foreign currency bill" includes not only those registered with Maldives Inland Revenue Authority (MIRA) for selling goods and providing services in the tourism sector, but also other parties that earn an annual income of USD 20 million from goods and services.

The bill stated that the foreign currency income received during one month must be deposited into a foreign currency account of a bank registered and operating in the Maldives before the 28th day of the third month following that month.

Among these parties, those not registered with MMA must submit for registration with the central bank within 10 days of the law coming into effect.

It also states that those who register with MIRA as a goods seller or service provider as defined by the law must register with MMA within 30 days of registering with MIRA.

The bill also stated that after transferring or depositing foreign currency into a bank, information about this and any other information required by the central bank must be reported to in a manner specified by the authority.

According to the bill, information and documents must be compiled for a minimum period of five years from the date the goods or services are sold.

The newly drafted bill also categorizes tourism sector goods sellers and service providers into two categories, with "Category A" including resorts, integrated tourist resorts, private islands, resort hotels, and other such establishments.

"Category B" includes tourist hotels, tourist guesthouses, and tourist vessels operating on inhabited islands.

The bill states that the parties mentioned in the bill must convert a portion of their foreign currency income.

As such, ‘Category A’ establishments must convert to Maldivian Rufiyaa at a bank, before the 28th day of the third month following the month, an amount calculated at the rate of USD 500 per tourist arriving during a single month, for the total number of tourists arrived during that month.

Further, ‘Category B’ tourism establishments must convert USD 25 per tourist arriving each month.

Service providers other than resorts or guesthouses must convert to MVR at a bank, before the 28th day of the third month following that month, an amount not exceeding 25 percent of the foreign currency income received during the month, as specified in the regulations made under the law.

While the hastily mandated regulation by MMA regarding foreign currency conversion did not provide any exemptions for parties required to convert dollars, it is noted that the newly drafted bill includes some exemptions. These include tourists who have not completed 24 hours, children under two years of age, and those staying for free or on a complimentary basis, which the bill states are not to be included among tourists.

In addition to this, the bill states that tourist vessels registered outside the Maldives will be exempt under this law.

The bill also states that if foreign currency is converted to the extent specified in the law, the authority may grant permission to convert a lesser amount if it is accepted upon submission to the authority that there will not be enough foreign currency to pay for obligations that must be paid in foreign currency, such as taxes payable in foreign currency, debts payable in foreign currency, obligations arising from a court judgment or arbitration case that must be paid in foreign currency, and other obligations approved by the central bank, if foreign currency is converted to the extent specified in the law.

The bill also states that banks must sell a certain percentage to the central bank, as determined by it, of the foreign currency received each week before the Wednesday of the following week.