General Regulation on Foreign Currency

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The Maldives Monetary Authority (MMA) has gazetted the General Regulation on Foreign Currency1 (the “General Regulation”) on 28 February 2025, enacted under the Foreign Currency Act 2 (the “FC Act”).

The General Regulation provides further details on key aspects of the FC Act, including mandatory currency conversion obligation routes, procedures for filing concession requests from conversion obligations, and the framework for implementing penalties under the FC Act.

Foreign currency transactions

The FC Act stipulates that all transactions within Maldives should be conducted in Maldivian Rufiyaa, subject to specific exemptions detailed in the FC Act itself. The General Regulation expands these exemptions, expressly allowing the following transactions to be carried out in foreign currency:

  1. Dealings between insurance companies and their customers, and dealings between insurance intermediaries and customers3;
  2. Loans, payment transactions and foreign exchange transactions between businesses and their shareholders;
  3. Foreign exchange transactions between businesses and related parties;
  4. Payments for goods and services by diplomatic missions and multilateral organisations based in Maldives and NGOs registered in Maldives.

Additionally, the Governor of the MMA retains discretionary authority to grant further exemptions based on broader policy considerations or submitted requests.

Categorisation of tourism establishments

The General Regulation provides further clarity on the categorisation of the following tourism establishments for the purposes of mandatory foreign currency conversion:

  • Tourist accommodation facilities located within yacht marinas are categorised as Category A tourism establishments;
  • Homestay accommodations are explicitly included under the guesthouse classification as Category B tourism establishments.

Mandatory conversion basis

Effective from 1 January 2025, the FC Act permitted tourism establishments to convert foreign currency on either:

  • Tourist arrival basis; or
  • Gross sales basis.

Entities (except for financial institutions) generating an annual foreign currency revenue of at least USD15 million (or equivalent) in the preceding calendar year through the sale of goods and services must convert on a gross sales basis.

The General Regulation clarifies the procedure for selecting the conversion basis by tourism establishments:

  1. Existing tourism establishments must inform the MMA of their chosen conversion basis when submitting their first Sales Report following the publication of the General Regulation.
  2. New tourism establishments must indicate their selected conversion basis to MMA at the time of submitting their initial Sales Report.
  3. Once selected, the conversion basis may only be changed once per year, specifically through the Sales Report submitted for January of each calendar year.
  4. Despite changing the conversion basis, entities must continue fulfilling any outstanding obligations under their previously selected basis.

Additionally, the General Regulation clarifies that any excess currency conversions during a calendar month may be adjusted against obligations arising in subsequent months, according to procedures specified by the MMA.

Calculation of the gross sales amount

The General Regulation does not define the term “gross sales”. Thus, there is still a level of uncertainty on how the amount should be derived. However, it has been provided that entities may deduct T-GST, Green Tax, and service charges from their gross sales amounts when determining their mandatory foreign currency conversion obligations.

Concession applications

The documentation requirements, submission and evaluation criteria for concession applications seeking to reduce the mandatory foreign currency conversion amount has been detailed in the General Regulation.

The MMA must evaluate complete concession applications and notify applicants of the outcome within 30 days. MMA may respond in one of the following ways:

  1. Accept the concession request, specifying the reduced conversion amount and the fulfilment period;
  2. Reject the concession request;
  3. Request additional documentation, specifying a timeframe for submission. Failure by the applicant to submit requested documents within this timeframe will result in cancellation of the application.

Temporary Suspension of Business

Businesses registered under the FC Act, who temporarily suspend the sale of goods and services must notify the MMA at least 10 working days before the effective date of suspension.

This requirement is particularly relevant for tourism establishments planning redevelopment or renovation projects, as the notification period must be factored when scheduling temporary closure of the facility.

Reporting requirement

The General Regulation specifies the following reporting deadlines for submissions that have to be completed via the MMA’s Foreign Exchange Portal.

Notably, the Conversion Declaration Form and Deposit Declaration Form have the same deadline but require two separate submissions, thus adding an additional administrative step.

Submission Information Due Date
Sales Report Details of the goods and services sold for the reporting month By the 28th day of the following month
Conversion Declaration Form Foreign currency conversions for the reporting month Within 10 working days of the following month
Deposit Declaration Form Foreign currency deposits for the reporting month Within 10 working days of the following month

Enforcement measures

The General Regulation sets out the enforcement actions applicable to entities in breach of the FC Act and its regulations, as follows:

  1. Initial Notice: A notice requiring the violating party to rectify the breach within 15 days.
  2. Final Notice: If non-compliance persists after the Initial Notice period, a final notice is issued, granting an additional 15 days to fulfil the obligation.
  3. Imposition of Fines: Continued non-compliance after the Final Notice period will result in fines as prescribed by the FC Act and General Regulation.
  4. Payment of Fines: Fines must be paid within 90 days from the date of imposition. During this period, parties may submit requests for relief.
  5. Suspension of Business Permits: Failure to either settle the fine or apply for relief within the 90-day payment period may lead the MMA to suspend government-issued business permits, following a further 15-day notice.

Parties may request approval from the MMA to settle imposed fines through an instalment arrangement.

The General Regulation also states that the MMA may procure the following documents and/or information from relevant parties if the MMA believes that a party subject to deposit or conversion requirements under the FC Act has falsified information in any Sales Reports, declarations or accounts submitted to the MMA:

  1. Party under investigation: Additional accounts and documents relating to the period;
  2. Banks: Information on banking transactions of the party ;
  3. MIRA: Tax returns and statements submitted by the party;
  4. Other authorities: Any other accounts or information provided by the party to any other authority.

Effective Date

The General Regulation came into effect on 28 February 2025.

References

  1. Regulation Number 2025/R-28
  2. Act Number 32/2024/R-28
  3. Dealings between insurance companies and providers of tourism sector goods and services are exempt under the FC Act, while the General Regulation covers other businesses