European travel associations urge Maldives to delay GST on foreign tourism businesses

Two associations representing travel agents and tour operators in Europe have called on the Maldives to delay the implementation of new Goods and Services Tax (GST) requirements for foreign booking platforms, travel agents and tour operators.

The calls follow President Mohamed Muizzu’s ratification of the Eighth Amendment to the Goods and Services Tax Act, which applies the destination principle to tourism services sold overseas for travel to the Maldives.

Under the amendment, offshore businesses selling inbound Maldives tourism products will be required to register for and pay the 17 per cent Tourism Goods and Services Tax (TGST). Collection under the new provisions is scheduled to begin on 1 October.

ABTA, which represents travel agents and tour operators in the United Kingdom, sent a letter to Tourism Minister Mohamed Ameen on Thursday raising concerns over the implementation of the amendment.

The European Travel Agents’ and Tour Operators’ Associations (ECTAA), based in Belgium, also wrote to Maldives Ambassador to Belgium and the European Union Dhiyana Saeed over the changes.

Both organisations acknowledged the Maldives’ right to determine its tax policy but raised concerns over the period given to overseas businesses to prepare for the new requirements.

One of the issues raised relates to holiday packages sold months before travel. Tour operators often price and sell packages up to a year in advance, meaning bookings for the coming winter season have already been sold at agreed prices.

The associations said European consumer protection rules restrict operators from increasing package prices after a sale in circumstances such as these. They said this could leave operators responsible for absorbing additional tax costs on bookings already sold.

ABTA and ECTAA also raised concerns over the requirement for foreign businesses to register regardless of their turnover.

They warned that the compliance requirements and additional costs could lead some businesses to reduce or stop sales of Maldives packages and shift business to other destinations.

The associations also said international tourism stakeholders had not been consulted before the amendment was introduced and passed.

Both groups called on the government to postpone implementation and hold consultations with overseas travel industry representatives before the tax is collected.

They also requested guidance on tax thresholds, the calculation of margins and the types of transactions covered by the amendment.

The associations proposed registration, reporting and payment procedures designed for non-resident businesses, as well as transitional arrangements for contracts and holiday packages sold before the new requirements take effect.

The amendment is part of changes intended to bring income generated through the overseas sale of Maldives tourism products within the country’s GST framework.