Maldives GST Rate Hike for Tourism: Key Changes for 2025

November 22, 2024

The president of the smallest Asian country, the Maldives, signed amendments to three taxation acts: the Airport Taxes and Fees (ATF) Law, the Maldives Tourism Law, and the Goods and Services Tax (GST) Law. All amendments relating to these three laws are published in the government's Official Gazette.

Impact of GST Amendments

The Maldivian GST Law defines rules for two main sectors: tourism goods and services (tourism sector) and general goods and services (general sector). The seventh amendment to the GST Law mainly impacts the tourism sector by increasing the applicable GST rate, meaning that the 8% GST rate will remain the same for the general sector.

The new GST rate for the tourism sector, 17%, will come into effect on July 1, 2025. The 17% GST rate will apply to goods sold and services provided by shops, diving schools, spas, water sports facilities, and other places established to sell goods and services to tourists.

The current 16% GST rate will remain unchanged until June 30, 2025, when the 17% GST rate comes into effect.

The amendments to GST Law also include exemptions to this rule. Therefore, shops and cafes operating exclusively for the employees of places offering tourist goods and services are exempted from this GST rate. Those shops and cafes authorized by the Ministry of Tourism will be subject to an 8% GST rate defined for the general sector.

Conclusion

This is the second increase in the GST rate for the tourism sector since the GST was introduced in 2011. When introduced, the GST rate for the tourism sector was 12%, and in 2023, it was increased to 16%. In 2023, the GST rate for the general sector was also increased from the initial 6% to 8%; thus, it remains to be seen if the Maldivian government will change that rate in the future.

All businesses operating in the tourism sector in Maldives have more than enough time to prepare for the increase in GST rate and adjust their prices, accounting, and bookkeeping systems.

Source: Inland Revenue Authority - The President ratifies new amendments to three taxation acts, Seventh Amendment to the GST Law, Inland Revenue Authority - Overview

What changes have been made to the Goods and Services Tax (GST) in the Maldives' tourism sector?

Effective July 1, 2025, the GST rate for the tourism sector in the Maldives will increase from the current 16% to 17%. This adjustment applies to goods and services provided by entities such as shops, diving schools, spas, and water sports facilities that cater to tourists.

How does this GST rate increase affect the general sector?

The GST rate for the general sector remains unchanged at 8%. The recent amendments specifically target the tourism sector, leaving the general sector's GST rate unaffected.

Are there any exemptions to the new GST rate in the tourism sector?

Yes, exemptions exist. Shops and cafes operating exclusively for employees of establishments offering tourist goods and services are exempt from the 17% GST rate. Instead, these establishments are subject to the general sector's 8% GST rate, provided they are authorized by the Ministry of Tourism.

How should businesses in the tourism sector prepare for this GST rate increase?

Businesses should update their pricing structures, accounting systems, and bookkeeping practices to reflect the new 17% GST rate effective from July 1, 2025. It's advisable to consult with tax professionals to ensure compliance and to understand the implications of this change on operations.

Has the GST rate for the tourism sector been increased before?

Yes, this is the second increase since the GST's introduction in 2011. Initially, the tourism sector's GST rate was 12%. It was raised to 16% in 2023, and the upcoming adjustment will set it at 17% starting July 1, 2025.

Where can I find more information about these tax amendments?

Detailed information is available in the official amendments published in the Maldives government's Official Gazette. Additionally, the Maldives Inland Revenue Authority provides resources and guidance on these changes.

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