Government submits bill to ease foreign currency conversion rules for Maldivian businesses

The Maldives government has submitted a bill to the People's Majlis to amend the Foreign Currency Act. The bill would raise the annual income threshold that triggers mandatory bank deposit requirements for businesses earning foreign currency and would change the rates some businesses must convert into rufiyaa.

MP Abdul Sattar Mohamed, who represents the Holhudhoo constituency, submitted the bill on behalf of the government.

Why the bill was submitted

The government said the amendment aims to review the criteria used to decide which businesses must deposit foreign currency earnings into a bank and which must convert a portion of that currency into rufiyaa. It also aims to tighten the rules for how Category A tourism establishments convert foreign currency.

The government also said the bill is meant to ease the conversion burden on businesses that are 100 percent Maldivian-owned outside the tourism and financial sectors. Officials said these businesses face difficulty meeting the required conversion amounts and deadlines under the current law.

Key changes proposed

Under the bill, mandatory bank deposit requirements would apply to two groups. The first is businesses that sell goods or provide services within the tourism sector. The second is any other business whose foreign currency earnings reach at least 25 million US dollars in a calendar year.

The current law sets that threshold at 15 million US dollars, according to PSM News.

Businesses would be required to deposit this income into an account opened at a bank licensed by the Maldives Monetary Authority (MMA), and to share the account details with the authority, the bill states.

The bill also sets specific conversion rates:

• Category A tourism establishments would need to convert 20 percent of their total monthly foreign currency income into rufiyaa.

• Businesses that are 100 percent Maldivian-owned and fall outside the tourism and financial sectors would need to convert 7 percent of their monthly foreign currency income into rufiyaa.

The MMA would set a transitional period for businesses newly required to make bank deposits under the revised law, to be defined in regulation. Once the amended law takes effect, existing regulations and procedures under it must be revised within 30 days, according to the bill.

Background on the current law

The Foreign Currency Act took effect in January last year. One of its biggest changes was a requirement for businesses to convert a set share of their incoming foreign currency at banks. The law divides foreign currency-earning businesses into three categories, each with different obligations.

Under the current law, resorts must convert either 500 US dollars per tourist or 20 percent of their foreign currency income, whichever applies, to Maldivian banks. Guesthouses are currently required to convert 25 US dollars per tourist or 20 percent of income, whichever is greater.

In an earlier statement reported by PSM News, the MMA said it wanted to remove the 500-US-dollar-per-tourist requirement for resorts entirely as part of proposed relief measures for the tourism sector. The bill submitted to the Majlis does not explicitly restate this specific change. It describes the current 500-dollar-per-tourist rule as the existing standard and sets out the 20 percent monthly conversion rate for Category A establishments, without directly addressing whether the per-tourist charge is removed. MBR was unable to confirm from the bill text alone whether the per-tourist rule is eliminated, retained, or altered. This should be verified against the final bill document before publication.

Related amendment to payment systems law

Alongside the Foreign Currency Act amendment, the MMA has proposed a change to the National Payment System Act. The proposal would require all point-of-sale (POS) systems used in the Maldives to be linked to a bank established in the country. The MMA said this is intended to support the creation of a national switch, allowing the authority to track transactions carried out within the Maldives.