- Parliament passed the Eighth Amendment to the GST Act on 23 August by 54 votes to two, requiring foreign booking platforms to pay Tourism GST on the margins they retain from Maldivian bookings.
- The reform closes a gap where overseas intermediaries earned commission income from Maldivian tourism without contributing GST like local competitors, taxing only the foreign margin rather than the full booking value.
- While the principle drew cross-party support, concerns remain that rushed implementation and limited consultation could burden smaller local businesses.
Foreign booking platforms profit from Maldivian holidays while much of their commission income remains outside the country’s GST system. Parliament has voted to close that gap, but a rushed introduction could leave smaller local businesses paying the price.
When a traveller in London, Berlin or Beijing books a week in the Maldives, a few clicks secure the villa, transfer and perhaps a meal plan. Behind the screen, the payment is divided. One share goes to the Maldivian property. Another remains with the overseas intermediary that arranged the sale.
Maldivian tax has generally followed the first share. The second has often remained beyond its reach.
That distinction sits at the centre of a bill Parliament passed on 23 August. It would require foreign businesses selling or arranging Maldivian tourism services to pay Tourism Goods and Services Tax on the margins they retain. These companies have been able to earn from the country’s most valuable industry without making the GST contribution expected from a Maldivian competitor.
The reform has been described as a threat to tourism and a risk to small businesses. Those concerns deserve examination. But they do not resolve the contradiction: the Maldives creates the holiday, supplies the workers and infrastructure, and markets the destination, while part of the resulting value leaves untaxed.
This helps explain why the bill drew support from both sides of Parliament. Opposition members questioned the speed and consultation, but the central principle faced less resistance. The argument was largely about how to collect the tax, not whether foreign businesses should contribute.
The Missing Piece of the Booking
The legislation is the Eighth Amendment to the Goods and Services Tax Act, Law No. 10/2011. Kulhudhuffushi North MP Mohamed Dawood introduced it for the Government on 15 August. Parliament passed it eight days later by 54 votes to two.
The legislation covers foreign tour operators, online booking platforms and overseas travel agencies without a permanent place of business in the Maldives. Accommodation, food, domestic transport and other tourism activities operated in the country fall within its definition of an inbound tourism product.
Its effect is easiest to understand through a hypothetical booking. Suppose a foreign platform charges a traveller USD 1,000 for a Maldivian stay, keeps USD 200 and pays USD 800 to the resort. The resort accounts for TGST on the value it receives. Under the gap the amendment is intended to close, the foreign company’s USD 200 margin can escape Maldivian GST.
The new system would not tax the entire USD 1,000 twice. It would apply the 17 per cent TGST to the foreign intermediary’s USD 200 margin, calculated by subtracting the amount payable to the Maldivian provider from the total amount received.
This is why comparisons with corporate income tax confuse the debate. Income tax applies to profit; GST applies to consumption. Under the destination principle, tourism consumed in the Maldives can be taxed even when the supplier is overseas. Double taxation agreements dealing mainly with income do not automatically remove a GST obligation.
The economic case goes beyond revenue. Maldivian travel agencies already operate inside the domestic tax system. Allowing an overseas competitor to escape GST on a comparable service creates an advantage based on location rather than efficiency. The amendment removes that imbalance and spreads part of the fiscal burden beyond local companies and households.
It could also keep more tourism value within the country. Foreign intermediaries provide useful marketing, payment and distribution services. But the product still begins with Maldivian islands, properties, workers and infrastructure. Taxing the margin recognises both sides of that relationship.
Would the Platforms Walk Away?
The most dramatic warning is that foreign platforms and tour operators could stop selling the Maldives or steer travellers towards competing destinations. For smaller guesthouses and travel agencies, which may depend on these partners for visibility, that possibility is unsettling.
Yet a large-scale retreat appears unlikely. The Maldives is not an obscure product that platforms list as a favour. It is one of the world’s most recognisable premium destinations, and travellers actively search for it. Removing a popular and valuable market would also cost the platforms revenue.
Australia, Singapore and Thailand already require some non-resident suppliers to register for VAT or GST through simplified systems. Europe uses margin-based taxation for tour operators. The models differ from the Maldivian proposal, but show that platforms can comply across borders. There is little indication that consumption taxes alone drive them away from commercially valuable destinations.
The market may still change. A platform could raise commissions or prices, alter contracts or reduce promotion. Smaller overseas agents may decide compliance is not worthwhile. The credible risk is not that the Maldives vanishes from booking sites. It is that the cost moves down the chain.
Large resort groups may be able to negotiate. An independent hotel or guesthouse may not. If a platform protects its earnings by raising commissions or reducing the amount remitted, the businesses least able to absorb the change could carry the heaviest burden. Tourists could also face higher displayed prices.
A Sound Reform, Rushed Into Place
This is where the Government’s handling of the bill becomes harder to defend. Tourism contracts and wholesale rates are often fixed months before guests arrive. Passing the amendment in August and aiming to begin collection in October gives platforms and Maldivian businesses little time to change contracts, accounting systems and booking arrangements before the winter season.
Foreign suppliers must register with the Maldives Inland Revenue Authority through simplified arrangements. The bill also requires invoices within three days, five-year record retention and allows MIRA to request information from Maldivian businesses about foreign partners. Further regulations will need to explain how returns, payments and enforcement will work in practice.
Nor does the proposal appear to contain a minimum registration threshold. Without one, a small overseas agency making occasional Maldivian bookings may face the same registration obligation as a global platform handling substantial sales. That could waste MIRA’s resources while discouraging smaller sellers for very little revenue.
Complex booking chains create another problem. A room may pass through a tour operator, wholesaler, local agent and platform before reaching the traveller. Without precise rules, businesses may not know who owes tax or on what amount. MIRA’s power to obtain information may assist enforcement, but could expose commercially sensitive partner and transaction data.
These are serious flaws, but they are flaws in implementation, not arguments for preserving the tax gap. The answer is a better transition, not permanent exemption.
Before collection begins, MIRA should publish examples covering agency sales, wholesale contracts, cancellations, refunds and multi-layer bookings. The rules should prevent duplicate taxation and include a reasonable registration threshold. Foreign businesses need simple online registration, returns and foreign-currency payments without local incorporation.
The Government should consult resorts, guesthouses, Maldivian agencies and major platforms before finalising regulations. Existing contracts need time to adjust. Commercial information must be protected, and authorities should monitor whether platforms shift disproportionate costs onto smaller local businesses.
After implementation, the Government should publish what the tax actually collects and track its effect on commissions, room prices, bookings and destination competitiveness. That evidence will be more valuable than an optimistic forecast made before the first return is filed.
The Maldives is not asking foreign platforms to pay simply because they are foreign. It is asking them to pay because they are conducting profitable business built around goods and services consumed in the Maldives. The distinction is important.
For too long, the tax system treated the intermediary’s location as more important than the holiday’s. Parliament was right to change that. With clear rules and enough preparation time, the amendment can close a long-standing gap without weakening the local businesses it is meant to treat more fairly.
