New GST rates to become effective today

The new tax rates, which were passed by the parliament and ratified by President Ibrahim Mohamed Solih in November, came into full effect on Sunday.

Under the amendment to the Maldives Tax Act, General Goods and Services Tax (GGST) and Tourism Goods and Services Tax (TGST) were increased to improve state revenues.

GST rates will increase from 6 to 8 percent for GGST and from 8 to 12 percent for TGST starting today.

The Maldives Inland Revenue Authority (MIRA) has published a fact sheet to help businesses prepare for the GST rate change. This fact sheet lists what businesses need to know in light of the tax hike. The sheet has already been published on MIRA’s official website.

The sheet provides information on ‘cut-off time’ in relation to the GST change and determining the GST rates that will be levied.

As per MIRA, cafés and restaurants, along with other businesses that do not provide 24-hour services, will begin implementing GST at the new rate on January 1, effective from the time they open for business.

Businesses that operate on a 24-hour basis must commence charging the new tax rate effective at 12:00 A.M. on Sunday midnight.

While GST rates increases today, Green Tax will remain unchanged despite TGST observing the hike. Green Tax will continue to be USD 6 per night per guest for tourist establishments with more than 50 rooms, and USD 3 for establishments with less than 50 rooms.

The tax hike drew a lot of criticism across the Maldivian political spectrum, with many opposition and ruling party MPs emphasising its potential negative economic impacts.

Maldives Association of Tourism Industry (MATI) and Maldives Association of Travel Agents and Tour Operators (MATATO) expressed concern about the tax hike. However, notable financial institutions such as International Monetary Fund (IMF) suggested positive long-term results.