Maldives Tax Application to Foreign Investments
Maldives is an island nation heavily depended on foreign investments in the Tourism industry. This article gives a brief introduction to the country and its tax system. It also gives you an introduction to country’s tourism industry, an example investment appraisal for a resort project, and tax exemptions and incentives available for foreign investments in tourism industry. It concludes with a summary of how foreign companies can enter into Maldivian market.
Maldives Tax Application to Foreign Investments
Maldives is an island nation heavily depended on foreign investments in the Tourism industry. This article gives a brief introduction to the country and its tax system. It also gives you an introduction to country’s tourism industry, an example investment appraisal for a resort project, and tax exemptions and incentives available for foreign investments in tourism industry. It concludes with a summary of how foreign companies can enter into Maldivian market.
Maldives
Maldives is a tropical island nation located in south-west of Sri Lanka and India. It has around 1,200 islands spread across 26 natural atolls. Inhabited are 200 islands while over 170 islands are resorts. The local population is just over 400 thousand. GDP of the country for the year 2024 was at USD 7.1 billion. Main source of foreign income into the country is from tourism accounting to 70%.
Tax System
Tax system in the Maldives was introduced relatively recently in the year 2010 when Tax Administration Act was enacted. Currently the types of taxes applicable to businesses are Income Tax, Goods & Services Tax (GST), Non-Resident Withholding Tax (NWT) and Green Tax.
Income tax is at 25% for banks and 15% for other businesses. GST for tourism sector is at 17% while it is at 8% for general sector. NWT is at 10% for rent, royalty, interest and dividends while it is at 5% for payments to contractors. Green tax is at USD 12 per guest per night from tourists at resorts while it is at USD 6 from tourists at local guesthouses.
Tourism Industry
Tourist arrivals into Maldives in 2024 was over 2 million guests. That is an increase of 9% compared to previous year. Occupancy rates at resorts average around 70-80% (EY,2023). Average daily room rates are USD 900 for luxury and USD 450 for mid-tier resorts. Currently there are over 170 operational resorts and 50+ new projects approved under foreign investments regime.
A Resort Investment Appraisal
An investment of USD 100 million for a mid-tier resort with 120 rooms will take up to 3 years for development. Revenue potential of such a resort is USD 25-30 million annually. Expected Operating Margin, Return on Investment and Payback are 35-40%, around 12% and around 9 years respectively.
Tax Exemptions
There are many tax exemptions and incentives available for investments in resorts. Tourism Act gives exemptions on import duty on construction materials. Income Tax Act can give Income tax exemptions for approved projects. Special Economic Zone Act gives exemptions for Income tax, GST and NWT for up to 2 years, and import duty exemption on capital goods for development stage.
Entry Into Maldives
To operate a resort in Maldives, a foreign investor can register a wholly-owned subsidiary company in Maldives or enter into a joint venture company with local shareholders. Either way, the investor will need to obtain foreign investment registration. Main entry routes into resort ownership are through public tender for acquisition of an island or by buying an existing resort or a lease on an island.
JPA Maldives
We are an emerging audit, tax and business advisory solutions provider established in the year 2023. We represent Maldives for JPA International, one of the top twenty five international networks in the field of audit and accounting.
We have a strong reputation for excellence, integrity and expertise, which enables us to provide comprehensive solutions to a wide range of clients across various industries.
Our team goes beyond local with strategic partnerships with JPA Emirates and JPA Sri Lanka. Our team is diverse with professional qualifications of CA, CPA, ACCA, ACMA, CGMA, CMA, CIA, CFE, MBA and university degrees, and with Big Four experience.
