Effective Date: 28 February 2025

The Maldives Monetary Authority (MMA) has recently published the General Regulation on Foreign Currency (Regulation No. 2025/R-28) regarding foreign currency transactions. This regulation supplements the Foreign Currency Act (Law No. 32/2024), and it provides further clarification on transactions that can be conducted in foreign currency, deposit and exchange procedures, and enforcement measures for violations.

Here’s an overview of the key aspects of this regulation that businesses operating in the Maldives need to understand.

1. Expanded Foreign Currency Transactions

The Foreign Currency Act set out specific transactions that could be carried out in foreign currency. The new regulation expands on this by allowing additional transactions in foreign currency beyond those specified in the Act.

1. Insurance Transactions: Initially, the Act allowed foreign currency transactions between insurance companies and tourism sector providers. The regulation now extends this to include non-tourism sector providers as well. Therefore, businesses in various sectors can now conduct transactions related to insurance policies in foreign currency.
2. Business Transactions with Shareholders and Related Parties: The regulation further expands the scope of transactions allowed in foreign currency between businesses earning income in foreign currency and their shareholders. These include loan transactions, payment transactions, and foreign currency buying and selling as legally permitted with shareholders. And foreign currency buying and selling as legally permitted with related parties. The term “related parties” is specifically defined to include:

1. Shareholders of the business earning foreign currency.
2. Partnerships where a shareholder of the business owns more than 25% of that partnership.
3. If the business earning Foreign Currency Income is a partnership, companies where the partner holds more than 25% of the shares.
4. Corporate groups that include the business earning Foreign Currency Income

3. Diplomatic Missions and Multilateral Organizations: Diplomatic missions, multilateral organizations, and associations registered in the Maldives are also given the right to transact in foreign currency for buying and selling transactions.
4. Governor’s Discretion: The regulation grants the governor the authority to approve other transactions that may be performed in foreign currency on a case-by-case basis.

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2. Foreign Currency Deposit and Reporting Requirements

The regulation outlines detailed procedures for businesses to comply with the foreign currency deposit requirements.

1. Threshold for Foreign Currency Deposits: Businesses whose foreign currency revenue exceed USD 15 million in the previous financial year must transfer their foreign currency proceeds to a designated foreign currency account. The deadline for this transfer is by the 28th of the third month following the realisation of the sales.
2. Reporting: The regulation requires businesses to submit a “Deposit Declaration Form” via the Foreign Exchange portal within 10 working days from the end of each month.

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3. Foreign Currency Exchange Requirements

The Foreign Currency Act established specific foreign currency exchange obligations for the businesses. These were divided into categories, with difference requirements depending on the type of establishment and their income level. However, the regulation has brought few changes which have been highlighted below.

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 including Yacht Marinas
Category B	Tourist Guesthouses including Home Stay 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

1. Calculation of Gross Sales: The regulation allows businesses to exclude the Tourism Goods and Service Tax, Green Tax, and Service Charges when calculating gross sales for the exchange requirement.
2. Exchange Option: Businesses can choose between the mandatory per head rate or 20% of gross sales when fulfilling their exchange obligations. They must select their preferred method at the beginning of each year. Any excess currency exchanged can be adjusted in future months.
3. Deadline for Currency Conversion: The currency conversion for each month must be completed by the 28th of the third month following the sales month. Conversion Declaration Form must be submitted via the Foreign Exchange portal within 10 working days from the end of the month.

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4. Exception to Exchange Requirement

Under the Foreign Currency Act, businesses that are unable to meet their full currency exchange obligations may apply to the MMA for approval to convert a reduced amount. The Act allows for exceptions under certain conditions, including:

Acceptable Reasons for Reduced Conversion:

1. Taxes and Other Government Obligations: Obligations that must be paid to the government in foreign currency.
2. Debts to Financial Institutions: Businesses that need to service debts to financial institutions in foreign currency.
3. Foreign Currency Payment Obligations: Obligations set by a court, tribunal, or arbitration judgment/order.
4. Other Foreign Currency Obligations: Any other foreign currency obligations approved by the MMA.

The regulation provides further clarification on what qualifies as “Other Foreign Currency obligations” that can be considered for a reduced conversion:

1. Obligations to Financial Institutions: These are foreign currency obligations required to be settled with financial institutions within the Maldives.
2. Other Foreign Currency Obligations: Any obligations that are submitted to and approved by the MMA.

Additionally, “Taxes and other obligations required to be paid to the government in foreign currency” refers specifically to obligations outlined under acts or regulations requiring payments in foreign currency. Likewise, “Debts to be serviced to a Financial Institution in foreign currency” refers to loans taken specifically for the business, including term loans that must be settled over more than one year.

a.    Application for Reduced Conversion:

Businesses seeking a reduced amount for conversion must submit a written application to the MMA, which should include the following details:

1. The reason for requesting a reduced amount and the duration for which it is required.
2. Required Documents:
   1. A Tax Clearance Report issued by MIRA, no older than one month.
   2. For government-related foreign currency obligations, an attested document proving the obligation.
   3. If the foreign currency obligation is a debt owed to a financial institution in the Maldives, an attested document proving the debt instrument.
   4. If the obligation is a loan, include documents related to the loan issued by the financial institution, along with an attested copy of the current loan statement.
   5. For obligations related to court, tribunal, or arbitration judgments, an attested copy of the relevant decision.
   6. Monthly Cash Flow Statement for the current year (or, if unavailable, cash flow statements for the last three months).
   7. Audited Financial Statement for the previous year (or, if unavailable, the most recent audited financial statement).
   8. Any other documents or information requested by the MMA.

b.    MMA Decision on Reduced Conversion:

The regulation stipulates that submitting an application for a reduced amount does not automatically grant approval. The business is still required to meet its obligations as per the Act and regulation. The MMA must decide on the application within 30 days from the submission date.

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5. Measures Against Violation of Law and Regulation

The regulation outlines a step-by-step process for handling violations of the law or regulation by businesses or other parties. The MMA has the authority to take several actions to enforce compliance.

1. Steps for Enforcement:

1. First Notice: If a party violates any direction issued by the authority, the MMA will issue a first notice, requiring the violation to be corrected within 15 days.
2. Final Notice: If the party fails to comply with the first notice, a final notice will be sent, also requiring correction within 15 days.
3. Actions for Unfulfilled Obligations: If the violation remains unresolved after the final notice, the MMA can take the following actions, depending on the nature of the violation:

2. Daily Fines for Unfulfilled Obligations:

1. Deposit Obligation: If the deposit obligation remains unfulfilled within 30 daysof the imposed fine, the MMA has the power to continue imposing a daily fine at a rate of 0.25% of the foreign currency required to be deposited for that month.
2. Conversion Obligation: Similarly, if the currency conversion obligation is still unmet within 30 days, the daily fine can be up to 0.5% of the required foreign currency to be converted.

3. Failure to Fulfil Registration Obligations:

If the fine pertains to a failure to meet registration obligations, and the party fails to register within 30 days, the MMA has the power to register the party itself. If the party continues to fail to meet deposit and conversion obligations, the MMA may take the measures outlined above.

4. Penalty Settlement and Leniency Requests:

1. Penalty Settlement: After the penalty is imposed, the business must settle the fine within 90 days of being notified. If the business wishes to request leniency, the request must be filed within the same 90-day period.
2. Instalment Plan: If the MMA grants an instalment plan for payment, the business must adhere to the terms of the instalment plan and settle the fine within the specified duration.
3. Failure to Pay or Request Leniency: If the fine is not paid within 90 days or no leniency request is made within the 90 days, a final notice will be sent with 15 days to settle the fine.
4. Further Actions: If the business still fails to pay within the final 15-day period or request for an instalment plan during this period, the MMA can:

1. Request relevant authorities to hold the business permit.
2. File a case in court to recover the outstanding fine or penalty.

The MMA will publish further rules regarding instalment plans for paying fines.

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6. Cases of Suspected Misrepresentation

If the MMA suspects that a business has misrepresented its sales reports or other declarations, it can:

1. Require the business to provide supporting accounts and documentation related to transactions for the period in question.
2. Obtain information from relevant agencies, such as banks, tax authorities (MIRA), and other agencies regarding transactions and tax returns.
3. If misrepresentation is confirmed, the MMA can order the business to:
   1. Correct the reports and provide accurate information.
   2. Deposit the correct amount of foreign currency sales and convert the correct amount of foreign currency.

Failure to comply with the MMA’s corrective notice can lead to penalties as outlined above.

7. Temporary and Permanent Business Cessation
   1. Temporary Cessation: If a business temporarily ceases operations and requires approval from any authority, the business must notify the MMA within 10 days from the planned cessation date. The notification must include:
      1. The date of cessation.
      2. The reason for cessation.
      3. The estimated date of resumption.

After reviewing the notification, the MMA will inform the business on how to handle its obligations during the temporary cessation period.

2. Permanent Cessation: If a business ceases operations permanently and deregisters from the relevant authority and MIRA, it must submit the deregistration documents to the MMA. The business will then be deregistered from the MMA registry as well.

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8. Deadline Chart

Action	Deadline
Submission of Sales Report	Within 10 working days from the end of the month
Transfer of Foreign Currency Sales to Designated Account	By 28th of the third month following sales realisation
Submission of Deposit Declaration Form	Within 10 working days from the end of the month
Submission ofConversion Declaration Form	Within 10 working days from the end of the month
Mandatory exchange	By 28th of the third month following sales month.

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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 Regulation, connect with QVL for tailored guidance and support.