Flurry of new taxes hurting Maldives tourism

A surge in taxes and the compulsory exchange of foreign currency to local currency for resorts in the Maldives has raised concerns among operators, especially as the industry continues to recover from the effects of the Covid-19 pandemic.

Starting December 1, the airport tax for foreign passengers will rise to US$50 for economy class, up from the current US$30. For business class passengers, the tax will double to US$120 from US$60, while first-class passengers will see an increase to US$240 from US$90. The increase for local passengers is lower in comparison.

From July 2025, the Tourism Goods and Services Tax (T-GST) goes up to 17 per cent from 16 per cent while from January 2025, the green tax – a daily fee levied on each tourist – will double to US$12 per day from US$6 for resorts of over 50 rooms and to US$6 from US$3 for resorts less than 50 rooms. In January 2023, this tax went up substantially from 12 per cent to 16 per cent, which had a significant impact on tourism in the Maldives.

In another move, prompted by a foreign exchange crisis faced by the government, resorts will be required to exchange US$500 per tourist into local currency starting in January, for resorts with an average daily rate (ADR) over US$800. This policy also applies to fam trips for travel agents and journalists, even though no revenue is generated from these activities. The Maldives Association of Tourism Industry (MATI) has raised concerns and reportedly urged the government to revise the rule, suggesting it apply to 10 per cent of total revenue instead. The government has yet to respond to this proposal.

Resort owners, speaking to TTG Asia on condition of anonymity, expressed concerns that the high taxes and compulsory foreign currency exchange would affect all aspects of their operations. “All our expenses, including food imports, loan repayments, fuel, utilities, salaries, and service charges, are paid in dollars, and we don’t have enough dollars for the compulsory exchange. The high taxes will kill the industry,” remarked one local owner.

In October this year, the Maldives Monetary Authority (MMA) announced plans to implement a new foreign exchange regulation which requires all foreign currency earnings from the tourism sector to be deposited in banks.

For several months, the country has been battling weakening foreign reserves and rising external government debt, and struggling to service its foreign debt. Fitch Rating stated in a report that the decline in foreign reserves to US$492 million in May 2024 from US$748 million a year ago reflects a persistently high current account deficit. Furthermore, Moody’s Ratings showed the country’s total external debt obligations are at about US$600 million to US$700 million in 2025 – this figure could rise to US$1 billion by 2026.

In a letter to the IATA on August 31, the finance minister informed the association of the increase in airport tax, stating that while such charges typically require four months’ notice, “…we urgently need to move forward as proposed given the challenging fiscal and external position of the country.”

The proposed departure tax increase puts a lot of pressure on tour operators as bookings have already been made until April 2025, resort owners said, adding that they may have to bear the loss.

An international chain CEO, who declined to be named, said: “We are urging the government (in a letter to the Ministry of Tourism) to delay these taxes and give the industry time to adjust to these changes as we have contracts running for more than six months. We are not opposed to the increased taxes but we are concerned about the timing of these changes.”

Despite these challenges, the Maldives remains optimistic, aiming for 2.2 million tourist arrivals in 2025, up from over 1.5 million in 2024.