Effective Date: 1 October 2024

1. In a significant move to regulate foreign currency transactions, the Maldives has enacted the Foreign Currency Regulation 2021/R-91, repealing the previous Monetary Regulation from 1 March 1987. This new regulation establishes clear guidelines for currency use across the nation, with the primary mandate that all transactions must be conducted in Maldivian Rufiyaa (MVR).

Key Provisions

Mandatory Use of Maldivian Rufiyaa

2. Under the new regulation, all transactions within the Maldives are required to be conducted in MVR with several key exemptions.
   • Foreign currency payments mandated by law or to the government or state institutions.
   • Banks and financing companies are allowed to conduct transactions in foreign currency related to their services and transactions with their customers.
   •  Transactions between remittance service providers and their customers can be conducted in foreign currency.
   • Dealings between insurance companies and tourism sector providers regarding insurance policies, as well as interactions between insurance intermediaries and customers related to such policies, are exempt.
   •  International transactions.
   • Payments for goods and services provided to tourists can be made in foreign currency.
   • Payments for exported goods and services may also be accepted in foreign currency.
   • Businesses earning foreign currency can opt to conduct transactions in foreign currency for goods, services, dividends, sale of shares, and staff salaries and allowances
   • Duty-free shops may accept foreign currency payments from tourists.

3. Failure to comply with this requirement can result in significant penalties, ranging from 10,000 MVR to 1,000,000 MVR.

Foreign Income Depositing and Exchange Rules

4. The regulation imposes strict requirements on tourism goods and service providers regarding foreign income:
   • Registration: All tourism goods and service providers are required to register with the Maldives Monetary Authority (MMA) within 30 days of the regulation’s enactment. New providers are required to register with the MMA within 30 days of their registration with the Maldives Inland Revenue Authority (MIRA).
   • Monthly Reporting: These service providers are required to submit an information sheet detailing the tourism goods and services offered each month by the 28th day of the following month.
   • Foreign Currency Transfers: By the end of the 28th day of the third month following the month that the sales proceeds are realised. These service providers must transfer their total foreign currency sales (realized proceeds) to a designated foreign currency account.

5. Under the new regulation, tourist establishments are classified into two categories, each with specific foreign currency exchange requirements.
6. Category A establishments include tourist resorts, integrated tourist resorts, resort hotels, hotels, tourist vessels, and similar businesses that are obliged to pay green tax. These establishments must exchange $500 per tourist per month for Maldivian Rufiyaa.
7. Category B establishments consist of tourist guesthouses and hotels located on local islands with 50 or fewer registered rooms, and they are required to exchange $25 per tourist per month that that are obliged to pay green tax.
8. These exchanges must occur before the end of the 28th day of the third month following the sales month. Exceptions may be granted by the MMA if fulfilling these requirements would hinder the establishment’s ability to meet essential foreign currency obligations, such as payments for taxes, debts owed to financial institutions, court-mandated obligations, and other MMA-approved transactions. This approach balances regulatory compliance with the practical needs of the tourism sector.

Banking Obligations

9. Banks are required to sell 60% of the foreign currency received to the MMA each week, with monthly reporting on currency exchanges involving Category A and B tourist establishments due by the 10th of the following month.

Record Keeping

10. Tourism establishments must maintain detailed records of goods and services provided for a period of five years.

Non-compliance with the above can result in fines ranging from 5,000 MVR to 1,000,000 MVR, with additional daily penalties of up to 5,000 MVR per day until compliance is achieved.

Conclusion

The implementation of the Foreign Currency Regulation is a pivotal step towards enhancing the Maldives economic framework and ensuring effective management of foreign currency transactions. All businesses and stakeholders in the tourism sector must stay informed and compliant to avoid penalties and contribute to a stable economic environment.