The Maldives Inland Revenue Authority (MIRA) has announced an increase in the Tourism Goods and Services Tax (TGST) rate from 16% to 17%, effective 1 July 2025. The adjustment, part of the 7th amendment to the Goods and Services Tax Act, aims to strengthen fiscal policy within the tourism sector, which is a cornerstone of the Maldivian economy.
Key Changes to the TGST Rate
Starting 1 July 2025, the 17% TGST rate will apply to all transactions where the “time of supply” occurs on or after this date. The “time of supply” is determined by the earlier of the date a tax invoice is issued or the date payment is received for the supply of goods or services. This distinction ensures clarity in cases where bookings or payments are made before the rate adjustment.
Implementation Guidelines
MIRA has outlined that businesses in the tourism sector, including resorts, guesthouses, restaurants, spas, and dive schools, must begin charging the new TGST rate as applicable. Businesses operating round-the-clock must implement the new rate from midnight on 1 July 2025, while others can begin applying it from their first operational hour on the same day.
Additionally, businesses are required to update their systems, such as point-of-sale (POS) systems, reservation platforms, and billing mechanisms, by 1 July to ensure smooth compliance with the new rate. Prices for tourism-related goods and services must reflect the revised TGST rate.
Clarifying Transitional Transactions
MIRA has provided detailed examples to clarify how the “time of supply” principle applies to transitional transactions around the rate change. For instance:
- If a guest books and pays for their stay before 1 July 2025, the 16% TGST rate applies, even if the stay occurs after the rate increase.
- Conversely, if payment or invoicing occurs on or after 1 July, the new 17% rate will be applied, regardless of when the service is delivered.
Preparing for Compliance
MIRA has advised businesses to make immediate preparations to ensure compliance with the updated tax rate. Failure to adhere to the revised guidelines could lead to penalties and disrupt operations in the Maldives’ highly competitive tourism industry.
The TGST rate adjustment reflects the government’s broader objectives to enhance revenue collection while maintaining transparency and consistency in the tax system. The Maldives continues to rely on its tourism sector as a vital economic driver, and the effective implementation of these changes will be key to sustaining growth and maintaining international competitiveness.
