Maldives proposes tax reform on destination principle to boost revenue

Government on Thursday proposed changes to the tax framework in the 2025 budget to apply the destination principle to goods and services consumed in the Maldives.

The proposed changes are intended to enhance revenue and address GST-related issues, particularly in the tourism sector.

Presenting the budget in parliament, finance minister Moosa Zameer outlined several revenue-raising measures, including adjustments to tax and fee rates associated with tourism. These adjustments will involve increases in departure tax, airport development fees, and TGST rates, aiming to minimise impact on the general public.

A key proposal is the introduction of the destination principle, an internationally recognised approach in which GST is applied to all goods and services consumed within a specific jurisdiction. This reform is set to begin in mid-2025.

"This change will apply TGST to tourism services provided by offshore travel agents and booking platforms," Zameer noted. "The main advantage of this shift will be the reduction of GST-related discrepancies between local businesses and large international online businesses, creating an equal footing for Maldivian companies in competing with major overseas entities."

In addition to revenue enhancement, the budget prioritises expenditure reduction. According to the finance ministry, measures will be enacted to expand the tax base to improve fiscal stability.

The government has acknowledged that tourism remains the Maldives' largest source of foreign exchange. However, significant portions of revenue from tour packages are currently charged abroad, which reduces the taxable amount within the country.