Effective Date: 1 January 2025

The new Foreign Currency Act (Law no: 32/2024) ratified on 14^th December 2024 is set to come into effect on 1 January 2025. This new law updated the regulation impacting foreign currency income earners and businesses in the tourism industry. It replaces the previously introduced Foreign Currency Regulation (2021/R-91), which was implemented just a few months ago on 1 October 2024.

Below, we break down the key elements of the Act, its requirements, and what it means for tourism operators and foreign currency earners operating in the Maldives.

1. Mandatory Use of Maldivian Rufiyaa (MVR)

Under the new Act, all transactions within the Maldives must be conducted in Maldivian Rufiyaa (MVR), except for specific circumstances outlined below:

1. Foreign Currency Transactions Permitted

• Legal Obligations: Payments to the government or state institutions required by law or regulation.
• Banks and Financing Companies: Banks and financing companies licensed by the Maldives Monetary Authority (MMA) can conduct transactions in foreign currency with their customers.
• Remittance Services: Transactions with remittance service providers licensed under the National Payment System Act (Law number 8/2021) can be conducted in foreign currency.
• Insurance Transactions: Transactions between insurance companies and tourism sector providers regarding insurance policies, as well as dealings between insurance intermediaries and customers, can be conducted in foreign currency.
• Transactions with the Securities Market in Maldives
• International Transactions: All international transactions can be conducted in foreign currency.
• Tourist Payments: Payments for goods and services provided to tourists (defined as foreigners on a tourist visa) can be accepted in foreign currency.
• Exports: Businesses can accept payments in foreign currency for exported goods and services.
• Earnings in Foreign Currency: Businesses earning income in foreign currency can opt to perform the below transactions in foreign currency.
  • Transactions in Foreign Currency: Payments made to vendors for goods and services supplied and these service providers are permitted to accept these payments in foreign currency.
  • Dividend Payment: Dividends paid to shareholders can be made in foreign currency, along with other dealings between shareholders and related parties.
  • Share, bond and Sukuk transactions: Sale and purchase transactions related to shares, issuance of bonds and Sukuk and transactions between holders of bond or Sukuk can be conducted in foreign currency.
  • Employee Salaries: Salaries and benefits for employees can be paid in foreign currency, and employees are permitted to accept these payments.

• Duty-Free Shops: Permitted to accept foreign currency payments from tourists.
• Obligations due to Court, Tribunal Decision or order: Payments are permitted in foreign currency if ordered by a court, tribunal, or Arbitration.
• Any other payment authorised by Regulation

It is important to note that, with the exception of transactions mandated to be settled in foreign currency to the state, government institutions and financial institutions under the applicable laws and regulations, Maldivians are not obligated to make payments in foreign currency for goods and services received within the Maldives.

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2. Registration and Reporting

1. Registration

• Existing Tourism Goods and Service Providers: If a business has already registered with the Maldives Inland Revenue Authority (MIRA) and has not yet registered with MMA under the previous regulation, it must register with the MMA by 10 January 2025.
• New Tourism Goods and Service Providers: Must register with MMA within 30 days of their MIRA registration.
• Businesses with Annual Sales of USD 15 Million or more in 2024: These entities must register with MMA by 30 January 2025.
• For Subsequent years: If a business’s annual sales reach the USD 15 million threshold in any given year, it must register with the MMA before the end of January of the following year in which the sales threshold is met.

2. Foreign Currency Deposit Requirement

Businesses must transfer their foreign currency sales proceeds to a designated foreign currency account by the 28th day of the third month following realisation.

Example: Sales realised in January 2025 must be deposited by 28 April 2025.

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3. Currency Exchange Requirements

The Act establishes specific foreign currency exchange obligations for businesses. These are divided into categories, with different requirements depending on the type of establishment and their income level.

Category	Covers	Exchange Requirement
Category A	Tourist Resorts	$500 per tourist per month OR 20% of the gross monthly sales
	Integrated Tourist Resorts
	Private Islands
	Resort Hotels
	Other such establishments
Category B	Tourist Guesthouses	$25 per tourist per month OR 20% of the gross monthly sales
	Tourist Vessels (except for tourist vessels registered and operating outside Maldives)
	Tourist Hotels
Additional Category	Establishment with sale proceeds realised in foreign currency equivalent to or more than USD 15 million in the prior financial year (other than Financial Institutions)	20% of the gross sales per month

Exclusion: The following individuals are excluded from head counting when determining currency exchange obligations:

• Tourists who stay less than 24 hours at the establishment
• Children under 12 years old who are tourists.
• Guests staying for free, on a complimentary basis
• Guests granted special immunity by the government

1. Currency Conversion

Businesses are required to complete the mandatory currency conversion for the month by the 28^th of the third month following the sales. For instance, the mandatory conversion for the month of January 2025 must be converted before 28^th April 2025.

2. Exception to Exchange Requirements

If the businesses are unable to meet their full currency exchange obligations specified above, they may apply for MMA approval to convert a reduced amount. Acceptable reasons include;

• Taxes and other obligations required to be paid to the government in a Foreign Currency
• Debts to be serviced to a Financial Institution in a Foreign Currency
• Foreign Currency payment obligation set out in a Court, Tribunal, Arbitral judgment or Order
• Any other Foreign Currency obligations permitted by the MMA

The MMA has the discretion to approve such applications if it determines that the applicant will not have sufficient Foreign Currency reserves to meet its Foreign Currency obligations specified.

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4. Banking Obligations

• Foreign Currency Sales to the MMA: Banks are required to sell a portion of the Foreign Currency they exchanged to the MMA as per the specific requirements and deadlines set by the MMA.
• Monthly Reporting: Banks must submit monthly reports on their foreign currency exchange activities to the MMA in line with the reporting format and schedule as required by the MMA.

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5. Deadline Chart

Action		Deadline
Registration	Existing Tourism related businesses registered with MIRA (if not registered under Foreign Currency Regulation (2024/R-91)	On or before 10th January 2025
	New Tourism Goods and Service Providers	Within 30 days from the date of registration with MIRA
	Businesses with Annual Sale proceeds realised in foreign currency equivalent to or more than USD 15 million in 2024	On or before 30th January 2025
	For Subsequent years if USD 15 million is reached	before the end of January of the following year in which the sales threshold is met
Transfer of Foreign Currency Sales to Designated Account		By 28th of the third month following sales realization
Mandatory exchange		By 28th of the third month following sales month.

6. Penalties for Non-Compliance

Violation	Penalty
Failure to deposit Foreign Currency to a Bank Account	Up to 0.25% of the undeposited amount. Daily fines may apply at this rate until compliance is met.
Failure to exchange the Foreign Currency as required	Up to 0.5% of the unexchanged amount. Daily fines may apply at this rate until compliance is met.
Other Violation of the Act or Regulation	Fine between MVR 10,000 – MVR 1,000,000.

Failure to pay these fines within 90 days could result in the MMA notifying the relevant authorities to hold or suspend licenses or permits issued to the business. Additionally, MMA can pursue enforcement through the courts to recover the unpaid fines. The regulation will outline procedures that will facilitate easing the fine payments.

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7. Transition Period

It is important to note that while the Foreign Currency Regulation (2024/R-91) will be officially repealed on 1 January 2025, obligations from previous Regulation related to October, November and December 2024 must still be met.

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Key Takeaways

Foreign Currency income earners and Tourism Goods and Service Providers must ensure that they;

• Complete their registration with the MMA as required;
• Fulfil monthly deposit obligations; and
• Meet monthly foreign currency exchange requirements.

The changing legal landscape can feel overwhelming, but by prioritizing preparedness and complying with these updated guidelines, businesses can effectively align with the revised framework, thereby minimizing the risks of disputes or penalties.

If you are uncertain about what lies ahead or want to ensure your operations continue smoothly under the new Act, connect with QVL for tailored guidance and support.