The Maldives commences implementing the Foreign Investment Act (Law No: 11/2024) (“Foreign Investment Act” or “Act”) on 3 December 2024, following its ratification into law on 3 September 2024. The new Act repeals the previous Maldives Foreign Investment Act of 1979. Unlike its predecessor, the Foreign Investment Act outlines a comprehensive structure for promoting foreign investments, granting approvals, and issuing licenses, while safeguarding the rights and responsibilities of investors.
The implementation of the new Foreign investment Act is tasked with the government ministry responsible for discharging foreign investment policies. Currently, this mandate lies with the Ministry of Economic Development and Trade (“MED”).
Below are the key takeaways from the new Foreign Investment Act.
Parties Eligible for investment Approval
- Foreign individuals.
- Foreign companies, including companies with all foreign shareholders, companies with both local and foreign shareholders, and companies incorporated outside of Maldives with local shareholders directly or indirectly holding 100% shares.
- Businesses registered in the Maldives such as partnerships with foreign shareholders, companies with foreign shareholders, and re-registered companies under the Companies Act.
- Joint venture arrangements established between Maldivians and foreigners.
- Foreign NGO’s.
- Legal entities incorporated under and governed by the laws of a foreign jurisdiction.
foreign investment areas
The Act classifies foreign investment areas into the following three categories:
- Open areas: these are areas in which foreign investors may freely invest without any restrictions.
- Restricted areas: these are areas in which foreign investments are permitted only upon fulfillment of specific conditions stipulated by the Ministry.
- Closed areas: these are areas where foreign investment is expressly prohibited. These areas will be determined based on national security, impact on industry competitiveness, local industry strength, the need for foreign investment in the industry, contribution to long-term growth, human resource development and job creation considerations.
On 3 December 2024, MED announced that the open, restricted and closed areas will remain subject to the existing Foreign Direct Investment Policy until further determination. The sectoral entry requirements can be viewed from here.
investment approval process
The Act stipulates that the following stages are to be followed when granting approval for foreign investments:
- Issuance of certificate of no objection: eligible individuals or entities receive a certificate allowing them to proceed with investment preparations.
- Completion of requirements and procedures: recipients of the no-objection certificate must fulfill all necessary requirements and procedures.
- Granting Foreign Investment License: licenses are issued to applicants who meet all established criteria and complete the required processes.
- Signing of Investment Agreement: investment agreements are finalized and signed with the licensed investors.
Key Considerations for Investment Approval
In deciding whether to grant foreign investment approval, the Ministry is required to consider the following:
- The applicant’s financial capability or ability to raise the necessary funds for the proposed investment.
- That the applicant is not a national of a foreign country or a foreign national controlling a company, partnership, or other legal entity, who is prohibited from entering or residing in the Maldives under the Immigration Act or any other relevant law.
- If the area of proposed investment falls under restricted areas, the applicant must comply with the specific conditions stipulated by the Ministry to proceed with the investment.
- If the proposed investment involves more than one restricted, the applicant must fulfill the conditions set by the Ministry for all relevant areas.
Additional Considerations for Approval
When determining whether to grant an investment approval the Ministry is also mandated to evaluate whether the proposed investment aligns with or promotes the national interest. At a minimum, the following factors are to be considered:
- The likelihood of the proposed investment posing a threat to national security.
- The impact of the proposed investment on the competitiveness of the sector, the level of domestic business development within that sector, and the necessity of foreign investment for its further growth.
- The potential of the proposed investment to create job opportunities and contribute to the development of human resources in the Maldives.
- The opportunities for enhancing the export of Maldivian products, goods, and services as a result of the proposed investment.
- The anticipated environmental impact of the proposed investment and the adequacy of the proposed mitigation measures.
- The potential for introducing or transferring technology and knowledge to the Maldives as a result of the proposed investment.
Rights and Immunities Granted to Investments
The new Act guarantees the following rights and immunities to Foreign Investments:
- Fair and equitable treatment: the new Act incorporates the international investment law principle of fair and equitable treatment typically aimed towards protecting foreign direct investments.
- Right to repatriate profits and capital: in general the Act grants foreign investors the right to repatriate profits and capital. However, in case of major economic downturns such as balance of payments deficit or foreign exchange pressures, authorities have the power to impose conditions to comply when repatriating profits and/or capital.
- Stability: the Act grants complete protection and immunity to foreign investments and profits realized from such investments. However, laws that are enacted protect sovereignty, territory, peace, security, environment, human rights, and in relation to natural disaster, and health pandemic that may affect foreign investments are permitted under the new Act and such laws would not constitute a violation of the stability granted to foreign investments.
- Prohibition on expropriation except in special circumstances: the Act prohibits expropriation of foreign investments by the State or any authority controlled by the State by operation of law or procedure. However, the State may expropriate a foreign investment to achieve a public benefit or territorial protection provided that adequate compensation is granted. The Act requires rules relating to compensation to be detailed out in the regulation, however specifies that compensation shall be calculated until the date of expropriation based on the fair market value of the investment. The Act also states that imposing taxes, enacting laws and regulations, taking measures to protect consumers, to prevent crime, or prevent loss to national economy and revoking Foreign Investment Licenses in accordance with the Act shall not constitute an act of expropriation.
license revocation
The Ministry is authorized to revoke or withhold Foreign Investment Licenses issued to investors in the following instances:
- Submission of false or misleading information during the license application process.
- Declaration of bankruptcy by the investor.
- Ownership restructuring of the business entity, resulting in all shares being held by Maldivian nationals.
- Failure by the investor to undertake the licensed activity for a period exceeding one year or engagement in unauthorized activities.
- Non-compliance with the terms and conditions specified in the license.
- Revocation of a prerequisite license by the relevant authority required for the conduct of the permitted activity.
- Dissolution or liquidation of a re-registered foreign entity.
non-compliance and penalty fines
| Violations | Penalty Fine |
| Engaging in business activities that contravene the Act and regulations enacted under the Act or conducting activities outside the scope of the Foreign Investment License. | Fines up to 30% of the total business or investment value. |
| Submission of false or misleading information during the Foreign Investment License application process. | Fines ranging from MVR 100,000 to MVR 1,000,000. |
| Violating the terms specified in the Foreign Investment License. | Fines ranging from MVR 100,000 to MVR 1,000,000, or up to 10% of the total business or investment value. |
| Failing to comply with the Ministry’s instructions to rectify actions that are inconsistent with the Foreign Investment License. | Fines ranging from MVR 100,000 to MVR 1,000,000, or up to 10% of the total business or investment value. |
transitional provisions
Foreign investments established and operating in the Maldives under a Foreign Investment License issued by the Ministry under the outgoing Foreign Investment Act (Law No. 25/79) is deemed compliant and permitted under this Act.
However, the current holders of Foreign Investment Licenses must apply for registration under the new Act within 12 months from now, i.e., 3 December 2025.
