Government Publishes Rules on Compensation for Tourism Lease Assets

The Auditor General’s Office has published the official guidelines for determining the valuation of assets and property on tourism-leased land that is either repossessed by the state or returned upon the expiry of the lease agreement, for the purpose of deducting such values from compensation settlements.

These regulations have been formulated by the Auditor General pursuant to Section 8 of the Maldives Tourism Act. The regulations shall come into effect from the date of their publication in the Government Gazette.

The primary objective of this regulation is to outline the procedures for determining the compensation payable by the state to a lessee for assets and property when a tourism-leased site is returned or repossessed upon the expiry of its lease term. Under these guidelines, the state will calculate the depreciated value of the property to establish the final settlement amount. Compensation under this regulation will be provided for both movable and immovable assets that are directly associated with the provision of business services at the premises.

The valuation process will include assets listed and maintained in the updated inventory submitted under the lease agreement. However, items that are unusable due to wear and tear, as well as those that cannot be restored through repairs or upgrades, will be excluded from these calculations. Furthermore, the regulations stipulate that no compensation will be provided for buildings or modifications constructed without the Ministry's approval or in violation of the officially sanctioned architectural plans.

The Ministry is required to grant the lessee a 90-day period to reclaim and remove their personal property. If the items are not removed and the premises are not vacated within this timeframe, the Ministry reserves the right to sell the property at auction or include it in the valuation process. Furthermore, any proceeds from the auction of items not included in the inventory must be returned to the lessee after deducting any applicable expenses.

All information and documentation required for the valuation shall be obtained through the Ministry. In this regard, the lessee is required to submit the inventory list, audited financial statements, and documentation of all capitalized expenditures incurred over the past five years. A designated focal point responsible for providing this information must be appointed and communicated to the Ministry within 15 days. Should the required information not be provided within 30 days, the valuation will be determined based on the current condition of the assets and their remaining useful life.

The valuation will be based on the historical cost, which refers to the original expenditure incurred to purchase or produce the assets. Furthermore, it must be determined whether the depreciation rates applied to the assets align with the average rates utilized within the tourism industry. From this calculated value, any outstanding payments owed to the state and projected maintenance costs will be deducted. The valuation process will be assigned to individuals or firms holding a valid audit license issued by the Institute of Chartered Accountants of the Maldives.

Audit reports must be submitted directly to the Auditor General’s Office. Following a review, the office will notify auditors of any necessary amendments. According to the regulations, the Ministry is required to arrange the disbursement of funds once the report is finalized, approved by the Auditor General, and communicated to the Ministry. The regulations further specify that any matters not explicitly covered within the guidelines shall be decided at the discretion of the Auditor General.