Nasheed warns tourism tax changes could push Maldives towards bankruptcy

Former President and opposition Maldivian Democratic Party (MDP) Chairperson Mohamed Nasheed has warned that changes to the Maldives’ tourism tax and foreign exchange policies could push the country towards bankruptcy, citing concerns raised by European tour operators and businesses.

In a post on X on Wednesday, Nasheed said he had received calls from European businesses and tour operators concerned about the government’s decision to implement the destination principle and impose Goods and Services Tax (GST) on offshore booking platforms, foreign travel agents and tour operators.

The eighth amendment to the Goods and Services Tax Act, ratified on 31 August, brings inbound tourism products and related agency and booking services supplied by businesses without a fixed place of business in the Maldives within the country’s GST framework. The 17 per cent tourism-sector GST will apply to these supplies from 1 October.

The changes come alongside an amendment to the foreign exchange framework requiring resorts to convert 40 per cent of their monthly gross foreign currency revenue through local banks.

Nasheed said European businesses and tour operators had raised concerns about both measures.

According to Nasheed, one concern was that requiring resorts to convert 40 per cent of their dollar revenue could leave them with insufficient foreign currency after meeting operating expenses and loan repayments to distribute dividends.

He also said European tour operators had told him that they already face taxes of around 20 per cent in their home jurisdictions. In addition, the Maldivian companies from which they purchase tourism services pay Tourism Goods and Services Tax (TGST) to the Maldives Inland Revenue Authority (MIRA), he said.

Nasheed said the businesses had complained that imposing a further tax obligation on their Maldives-related business would be difficult to manage.

“I do not see where a solution to these concerns will come from. The Maldives is on the brink of bankruptcy,” Nasheed said.

The amended GST Act applies the destination principle to inbound tourism products, including accommodation, meals, transport and other tourism-related activities in the Maldives. It also covers agency and booking services associated with those products when supplied by businesses without a fixed place of business in the country.

The current tourism-sector GST rate is 17 per cent, which has applied since 1 July 2025.

Nasheed’s comments come amid objections from foreign tourism businesses to the implementation timeline for the new tax rules. European tour operators, travel agents and industry associations have called for the introduction of the 17 per cent GST requirement to be postponed.

The 40 per cent foreign currency conversion requirement has also faced criticism from sections of the tourism industry. Nasheed has previously argued that the requirement could affect the financial viability of resorts and businesses connected to the sector.