Foreign travel agents launch petition over Maldives GST amendments
The petitioners argue that the value generated through activities performed overseas should not be treated as a tourism service supplied within the country.
Foreign travel agents, tour operators and booking platforms selling Maldives holidays have launched an online petition calling for changes to the implementation of amendments extending Goods and Services Tax (GST) obligations to overseas tourism businesses.
The petition, addressed to the President's Office, Maldives Inland Revenue Authority (MIRA), Parliament and Ministry of Finance, calls for commissions, margins and service income earned by foreign travel businesses for work carried out outside the Maldives to be excluded from Tourism Goods and Services Tax (TGST).
Parliament passed amendments to the Goods and Services Tax Act on 23 August to apply the destination principle to goods and services supplied to the Maldives by foreign businesses in the tourism sector. The changes are scheduled to take effect in October.
The petitioners said they accepted the principle of taxing tourism services supplied within the Maldives but questioned the application of TGST to income generated through activities carried out overseas.
“Our concern is not the taxation of tourism services provided within the Maldives. Our concern is taxing the commission, margin, or service income generated from business operations conducted outside the Maldives,” the petition states.
“A foreign tour operator or travel agent does far more than simply resell a hotel room.”
The petition argues that overseas travel companies incur costs in their home markets for marketing, staffing, sales and other operations involved in attracting tourists to the Maldives.
While tourists ultimately consume accommodation and other tourism services in the Maldives, the petitioners argue that the value generated through activities performed overseas should not be treated as a tourism service supplied within the country.
“Travel agents and tour operators have invested their time and capital over many years to market Maldivian tourism abroad,” the petition states.
“We introduce the destination, educate tourists on the differences between various islands and luxury resorts, generate demand, bring in first-time visitors, and encourage repeat visits.”
The petition also raises concerns about the effect of the changes on business-to-business arrangements between overseas travel companies and Maldivian travel agents, tour operators and Destination Management Companies (DMCs).
It notes that many foreign companies work with Maldivian businesses that are already registered for tax and argues that imposing the 17 per cent TGST rate on foreign distributors could affect these partnerships.
The petitioners are seeking an exemption for commissions and margins earned by the overseas travel trade, as well as an exemption for foreign tour operators working directly with Maldivian businesses.
They are also asking the government to provide a transition period for overseas businesses to register and comply with the new requirements and to exclude bookings confirmed before the rules take effect.
The petition further calls for consultation with tourism industry representatives before the implementation framework is finalised.
Another concern raised is the application of the same regulatory framework to small travel agencies and online booking platforms operating at a larger scale. The petitioners argue that differences in the size and nature of these businesses should be considered when implementing the tax requirements.
The Maldives Association of Travel Agents and Tour Operators (MATATO) has also raised concerns over the amendments. MATATO has called for a transition period, clearer rules for foreign businesses, protection of business data and consultation with the tourism industry.
The government has maintained that extending GST obligations to foreign tourism businesses will not affect the competitiveness of the Maldives tourism industry.
