The Maldives’ Foreign Currency Act, ratified on 14 December 2024, will come into force on 1 January 2025, introducing comprehensive measures to regulate foreign currency transactions, particularly targeting the tourism sector and high-revenue businesses.
The Act replaces the long-standing Monetary Regulation of 1987 and seeks to ensure a streamlined approach to managing foreign exchange inflows. Businesses, especially within the tourism industry, are now required to convert portions of their foreign currency earnings into Maldivian Rufiyaa (MVR).
Key Conversion Requirements
The Act categorises businesses into three main groups:
- Category A:
- Includes resorts, integrated tourist resorts, and resort hotels.
- Must convert either USD 500 per tourist per month or 20% of their gross monthly foreign currency sales.
- Category B:
- Includes tourist vessels, tourist hotels, and guesthouses.
- Required to convert either USD 25 per tourist per month or 20% of gross monthly foreign currency sales.
- High-Income Entities:
- Businesses earning an annual foreign currency revenue of at least USD 15 million.
- Required to convert 20% of gross monthly foreign currency sales.
These measures aim to regulate the flow of foreign currency while ensuring sufficient Rufiyaa liquidity within the local economy.
Deposit Obligations
The Act mandates businesses to deposit their realised foreign currency earnings into local bank accounts within three months of the transaction month. For example, businesses earning foreign currency in January 2025 must comply by 28 April 2025.
Exemptions and Concessions
Exemptions are provided for transactions involving government institutions, exported goods and services, and dealings with tourists. Notably, transactions involving children under 12 years of age, complimentary stays, or tourists staying less than 24 hours are excluded from conversion calculations.
Businesses unable to meet the conversion requirements while fulfilling other foreign currency obligations—such as tax payments or debt servicing—may apply to the Maldives Monetary Authority (MMA) for concessions.
Penalties for Non-Compliance
Strict penalties accompany the Act to ensure compliance. Fines of up to 0.5% of unconverted amounts can be imposed monthly, while unresolved fines beyond 90 days may lead to suspension of business permits.
Implications for the Economy
The Foreign Currency Act represents a significant regulatory shift aimed at strengthening the nation’s fiscal framework, ensuring transparency, and stabilising foreign currency management. While the Act addresses concerns of foreign exchange outflows, businesses must adapt to the new compliance timelines and reporting requirements as they come into effect in January 2025.
The Maldives Monetary Authority is expected to oversee the implementation of the Act, with additional regulations and procedural details anticipated in the coming months.
