KEY CHANGES INTRODUCED
- Limits the types of transactions allowed in foreign currency.
- Requires that tourism sales proceeds be deposited in local banks.
- Imposes mandatory foreign currency exchange controls on tourism establishments and banks.
- Mandates the registration of tourism establishments with the MMA.
ABOUT THE REGULATION
On 1 October 2024, the Maldives Monetary Authority (“MMA”) introduced a new regulation on the use of foreign currency in the Maldives. The Foreign Currency Regulation (Regulation No: 2024/R-91) was issued by the MMA under the authority of Sections 24 and 38 of the Maldives Monetary Authority Act (Law No: 6/81), to govern foreign exchange matters in the country. This Regulation, effective from 1 October 2024, replaces the Monetary Regulation of 1987.
mandatory requirement on local currency use
The new Regulation maintains the requirement that all transactions within the Maldives must be conducted in local currency, except for those explicitly allowed in foreign currency.
It mandates that payment for goods and services, value for works, fees, charges, rent and wages be made in local currency and prohibits invoicing for these transactions in foreign currency.
Transactions Allowed in Foreign Currency
The Regulation exempts the following transactions from the mandatory local currency requirement, allowing the use of foreign currency:
| Banks and financing companies | services provided by these institutions, and transactions between them and their customers, can be conducted in foreign currency. |
| Remittance service providers | foreign currency is allowed in remittance transactions between these providers and their customers. |
| Insurance companies | transactions between insurance companies and tourism goods and service providers in relation to insurance policies, as well as transactions between insurance intermediaries and customers, can be done in foreign currency. |
| In relation to tourists (those who enter the Maldives under a tourist visa) | receiving payments for goods and services provided to tourists, along with making and receiving payments for goods and services sold to tourists at duty free shops, can be done in foreign currency. |
| Exports | payments for goods and services exported can be received in foreign currency. |
| Businesses that derive income in foreign currency | such businesses can make payments in foreign currency for goods and services they obtain, providers of such goods and services can accept payments in foreign currency, pay dividends in foreign currency, conduct transactions with shareholders and related parties, execute share sale transactions, and pay employees’ salaries and entitlements in foreign currency. |
| Payments to the Government | Government or State authorities are allowed to make and receive payments in foreign currency that are permitted by an act of Parliament or regulation. |
| International transactions | international money transfers of foreign currency to and from the Maldives are permitted. |
Mandatory Deposit of Tourism Sales Proceeds in Foreign Currency
The new Regulation requires tourism goods and service providers to deposit all “realized sales proceeds” from tourism goods and services received within a month into a foreign currency bank account held at a bank registered in the Maldives. These sale proceeds must be deposited before the 28th day of the third month following the month in which the sales occurred. For example, proceeds from sales realized in October 2024 (regardless of when the sales were made) must be deposited by 28 January 2025.
Tourism sales proceeds can be deposited in United States Dollars or in any other foreign currency authorized by the MMA.
The Regulation does not state a minimum period for which the tourism sales proceeds must be maintained in local bank accounts in order to comply with this requirement.
Foreign Exchange Controls
The Regulation introduces surrender requirements focusing on foreign currency income earned by tourism establishments and foreign currency deposits made with banks. Tourism establishments are required to exchange a specific amount of United States Dollars for local currency at a local bank on a monthly basis, while local banks must sell 60% of the foreign currency deposited with them to the MMA on a weekly basis.
Tourism establishments classified as Category A under the Regulation (including tourist resorts, integrated tourist resorts, resort hotels, hotels, tourist vessels, and any other establishments subject to Green Tax) must exchange an amount in US$ equivalent to the total number of tourist arrivals per month at a rate of US$ 500.00 per tourist.
Category B tourism establishments (such as tourist guesthouses and hotels located in inhabited islands with 50 or fewer rooms, also subject to Green Tax) are required to exchange an amount in US$ equivalent to the total number of tourist arrivals per month at a rate of US$ 25.00 per tourist.
The US$ earned by tourism establishments in a month must be exchanged by the 28th day of the third month following that month. The responsibility for implementing this obligation lies with the operators of these tourism establishments.
Concessions to Tourism Establishments on Mandatory Foreign Exchange
Tourism establishments with foreign currency payment obligations may request a concession from the MMA if complying with the mandatory foreign exchange requirement would cause them to default on those obligations. The MMA may grant a concession by allowing the establishment to exchange less than the required amount under the Regulation, provided the obligation relates to any of the following and the MMA deems the concession necessary:
- tax obligations in foreign currency;
- debt payments to a financial institution in foreign currency;
- judgment debt obligations in foreign currency; or
- any other obligations authorized by the MMA.
It remains unclear whether the concession granted by the MMA constitutes a waiver or deferment of the required amount. Future guidance from the MMA is expected to clarify this.
Obligation to Register with the MMA
Tourism goods and service providers registered with the Maldives Inland Revenue Authority (“MIRA”) on or before 1 October 2024 must register with the MMA within 30 days of this date.
Providers that register with MIRA after 1 October 2024 are required to register with the MMA within 30 days of their MIRA registration.
Tourism goods and service providers can register with the MMA from here.
Reporting and Record-Keeping Obligations
Tourism goods and service providers must report the following to the MMA:
- details of tourism goods and services provided within a month, by the 28th of the following month; and
- details of foreign currency bank deposits related to tourism sales proceeds, along with any other information required by the MMA.
Tourism establishments must also report the details of foreign currency sold to local banks each month within 10 working days of the month’s end. Banks are required to report, in the manner and frequency determined by the MMA, the details of foreign currency sold by both Category A and Category B tourism establishments.
Tourism goods and service providers are required to maintain records of goods and services provided for five years from the date of each transaction.
Penalties for Non-Compliance
Under the Regulation, the MMA has the authority to impose the following penalty fines for non-compliances:
- MVR 10,000.00 to MVR 1,000,000.00 for failure to adhere to the requirement of using local currency in transactions, except for those explicitly allowed in foreign currency.
- MVR 5,000.00 to MVR 1,000,000.00 for failure to register with the MMA, report to MMA, deposit tourism sales proceeds into local bank accounts, comply with mandatory foreign exchange controls and to maintain records as prescribed in the Regulation. Additionally, the MMA may impose a daily fine of MVR 5,000.00 until the non-compliance is remedied.
