Parliament passes bill to levy GST on foreign booking platforms, tour operators

Parliament on Sunday passed an amendment to the Goods and Services Tax Act to impose GST on goods and services supplied to the Maldives by foreign businesses operating in the tourism sector.

The bill will bring offshore booking platforms, foreign tour operators and overseas travel agents within the scope of the Maldivian GST system.

The government expects the measure to generate about MVR 1.6 billion in state revenue each year.

The bill was introduced in parliament last Sunday night by PNC MP for Kulhudhuffushi North Mohamed Dawood. Following debate the next day, it was referred to the Committee of the Whole House.

The committee completed its review within two days and initially recommended passing the bill without changes.

Before the vote during Sunday’s sitting, PNC MP for Thulusdhoo Ibrahim Naseem proposed three amendments to clarify provisions in the legislation.

The bill, incorporating those amendments, was passed with 54 votes in favour and two against. Of the 57 MPs present, 56 participated in the vote.

One of Naseem’s amendments adds inbound tourism products and related agency or booking services supplied by foreign entities without a permanent place of business in the Maldives to the provisions under Section 9 of the Act.

Another amendment defines “services” as anything that does not fall within the definition of goods, while specifying that money will not be considered a service.

The third amendment gives the Maldives Inland Revenue Authority (MIRA) powers to require entities to provide information needed to determine whether businesses required to register as inbound tourism service providers have done so.

The legislation is intended to apply the destination principle to the GST system, under which goods and services are generally taxed where they are consumed.

Under the amendment, GST will apply to tourism-related goods and services supplied to the Maldives by offshore booking platforms, foreign tour operators and overseas travel agents.

As many of these businesses do not have a physical presence in the Maldives, the legislation provides for their GST registration and payments to begin after MIRA establishes mechanisms to facilitate compliance.

Collection of GST under the expanded scope is scheduled to begin in October.

Government projections estimate that the measure will generate MVR 299.3 million annually from overseas travel agents and about MVR 1.3 billion from foreign tour operators.

The combined revenue from the changes is projected at about MVR 1.6 billion per year.