Russian tourism association calls on Maldives to reverse new GST rules

A Russian tourism industry association has called on the Maldives to reconsider new tax rules requiring overseas booking platforms, travel agents and tour operators selling Maldives tourism products to register for and pay Goods and Services Tax (GST).

The Russian Union of Travel Industry (RST), which represents more than 3,000 tourism businesses, said the requirements due to take effect from October would be difficult to implement in Russia and called for Russian companies to be exempted.

The Eighth Amendment to the Maldives GST Act was ratified on 31 August. The changes apply the destination principle to inbound tourism products and related booking and agency services supplied by overseas businesses.

Russia has been one of the Maldives’ largest tourism source markets in recent years. So far this year, 224,031 tourists have arrived from Russia, placing the country second among source markets, according to figures cited in the report.

RST outlined its concerns in a letter sent on Wednesday to Maldives Ambassador to Russia Abdul Raheem Abdul Latheef.

One of the association’s main concerns is the requirement for Russian companies to pay tax to the Maldivian government on transactions conducted in Russia. RST argued that complying with such a requirement would not be legally possible under Russian regulations.

Russian tour operators and travel agents purchase holiday packages from Maldivian companies at prices that already include taxes charged in the Maldives. When those packages are sold in Russia, the companies are also subject to taxes applicable there, the association said.

RST said implementation of the amended Maldives law would require the Maldives Inland Revenue Authority (MIRA) to obtain information on transactions carried out by Russian companies in Russia.

The association argued that there was no mechanism for a foreign tax authority to exercise tax control over business transactions conducted in Russia.

RST therefore called for Russian companies to be exempted from the new requirements. It also requested that additional taxes not be imposed retrospectively on transactions completed before the amendments take effect.

Under the amended GST Act, overseas suppliers of inbound tourism products and related booking or agency services are required to register with MIRA for tourism-sector GST. MIRA has opened a registration process specifically for overseas suppliers.

The law defines an inbound tourism product as accommodation, meals, transport or other tourist activities in the Maldives. Such products and related booking and agency services supplied by businesses without a fixed place of business in the Maldives will be subject to the 17 per cent tourism GST rate from 1 October.

Russian tour operators have already begun receiving notices from MIRA regarding the requirement to register under the new system, according to reports in Russia.

Tourism industry associations in Italy and France, both major source markets for the Maldives, have also called for the changes to be reconsidered, according to the report.