The Maldivian government has announced amendments to its tax laws, specifically affecting the tourism sector. These changes include an increase in the Tourism Goods and Services Tax (TGST), an increase in the Green Tax, and adjustments to airport taxes and fees. These modifications are part of a broader fiscal strategy aimed at addressing the economic challenges faced by the country. This article outlines the key changes and examines their potential impacts on tourists and the local economy.

Increase in Tourism Goods and Services Tax (TGST)

The Tourism Goods and Services Tax (TGST) is increased from 16% to 17%, effective July 1, 2025.

Current and Proposed Tax Rates:

Furthermore, cafés situated in tourist facilities that serve only staff members are now excluded from TGST, whereas previously, only shops within these facilities were exempt. Nonetheless, both are still liable to the General Goods and Services Tax (GGST).

The General Goods and Services Tax (GGST) applicable to other sectors is unaffected by this amendment.

Increase in Green Tax

Two significant changes have been introduced for the green tax:

1. Exclusion of infants: Infants under two years are now excluded from the scope of the green tax effective from 1^st January 2025
2. Increase in Green Tax Rates; The green tax rates will be increased as follows:

*The aforementioned green tax rates are applied per guest, per night of stay.

Changes in airport taxes and fees

In addition to the changes in TGST and Green Tax, the government has also introduced amendments to airport taxes and fees.

Departure Tax is levied on passengers departing the Maldives based on the class of travel. Following changes are brought to departure tax rates, which is set to come in effect from 1 December 2024 onwards.

Airport Development Fee (“ADF”)

In addition to Departure Tax specified above, ADF is collected from passengers departing from Maldives from Velana International Airport. The amendment introduces following changes to ADF rates which are also set to come in effect from 1 December 2024 onwards.

It is important to note that the ADF and Departure Tax rates for Maldivian passengers traveling in economy class will remain unchanged.

Additionally, the amendment introduces provisions for reclaiming any excess or incorrectly collected airport taxes and fees paid to the Maldives Inland Revenue Authority (MIRA) where these amounts are later refunded to the passenger.

An Outlook on What’s Next

As the impending tax increases approach implementation, it is essential to recognize that these adjustments are in accordance with the strategic objectives outlined in the "Maldives Medium Term Revenue Strategy," issued by the Ministry of Finance in June 2024. This strategy document had originally scheduled the review of airport taxes and fees for 2024, and the review of green tax and GST rates for 2025, indicating an acceleration in the implementation timeline.

Looking ahead to 2025, the strategy further details several key policy initiatives:

1. Broadening the GST Base
2. Formulating an Excise Tax Regime
3. Reviewing Import Duty Rates
4. Reviewing the CIT Rate for Telecom Operators
5. Reviewing the Tourism Land Rent Regime

For additional information and expert guidance on how these changes may affect your tax obligations, please reach out to CST Advisory LLP at [email protected]. Our team of specialists is prepared to assist you in effectively navigating these changes.