The Maldives is set to impose a new 17% tourism tax on foreign travel companies starting October 1, a move that has drawn immediate protest from UK travel association ABTA. The tax, approved through an amendment to the country's GST Act, requires overseas tour operators, travel agents, and booking businesses selling Maldives holidays to register with the Maldives Inland Revenue Authority and pay the Tourism Goods and Services Tax.
This change shifts the Maldives to a destination-based tax system, allowing it to tax tourism services consumed within its borders even when sold by overseas firms. The tax applies to accommodation, meals, transportation, tourist activities, and related booking services. Notably, there is no registration threshold for these foreign suppliers, unlike the standard MVR1 million exemption.
In a letter dated September 24, ABTA called for a minimum six-month postponement to allow consultation with the international travel industry. The association also requested that overseas agents acting as disclosed agents for tour operators be excluded from the requirements. ABTA's Director of Industry Relations, Susan Deer, said the legislation was introduced without consultation and that the rules are not fit for purpose, warning of practical problems for UK operators with already contracted holidays.
The tax is calculated on the margin between what the traveler pays and what is paid to the Maldivian supplier, not the full holiday price. For example, a $2,500 package with $2,100 in supplier costs would incur tax on a $400 margin, resulting in $68 in T-GST. The Maldivian government estimates the reform could generate about MVR1.6 billion annually.
For travelers, this could mean higher costs or administrative complications for Maldives holidays booked through foreign agencies, as the October 1 deadline approaches with no resolution yet between ABTA and the Maldives government.
