European tour operators urge Maldives to delay new GST on foreign agents

Several associations representing European tour operators and travel agents have asked the Maldivian government and the Maldives Inland Revenue Authority (MIRA) to postpone the implementation of the amendment to the Goods and Services Tax Act that will levy tax on foreign travel agents from next month.

The Eighth Amendment to the GST Act was approved by the President on the 31st of last month.

Concerns about the financial, administrative and practical challenges of the reform have been raised by Les Entreprises du Voyage (EDV), the French association representing travel agencies and tour operators; Syndicat des Entreprises du Tour Operating (SETO), the French tour-operator union; and ASTOI Confindustria Viaggi, the national association representing Italian tour operators.

In a letter signed by Pier Ezhaya, President of ASTOI, the association said the Italian market, which sends around 153,000 tourists to the Maldives annually, is one of the most important European source markets for Maldivian tourism. While acknowledging that the Maldives has full discretion to determine its fiscal policy, ASTOI said the amendment is being implemented with insufficient lead time for operators who have already priced, marketed and sold their winter-season packages.

The associations noted that, even as the effective date approaches, no operational compliance framework has been published to guide foreign entities on registration, invoicing, documentation, filing or payment procedures. ASTOI said international operators currently have no certainty regarding how to comply with the new regime, including how cancellations, amendments, refunds and multi-jurisdictional transactions will be treated.

In addition, international package tours, which combine Maldivian services with flights, insurance and other components sold under a single price, face challenges due to the absence of a clear rule to determine the taxable value attributable specifically to Maldivian services. ASTOI said the commercial margin of a package cannot ordinarily be allocated to individual components with precision, making compliance “not reasonably achievable” under the current rules.

ASTOI has therefore requested that the government consider repealing or revising the provisions extending the GST regime to non-resident suppliers, and that the implementation schedule be reviewed. At a minimum, the association asked for the new provisions to be postponed until a complete and workable compliance framework is established and adequately communicated to affected operators.

Tour operators requested:  

• taking into account the repeal or amendment of the provisions extending the GST regime to non-resident persons;  

• reviewing the implementation schedule again and, at a minimum, postponing the new provisions until a comprehensive and applicable compliance framework has been put in place and affected stakeholders have been adequately notified.

Meanwhile, EDV and SETO, in their joint letter to MIRA Commissioner General of Taxation Fathimath Ameeza, noted that hotel rates are negotiated up to a year in advance and packages for the upcoming winter and December season have already been sold at fixed prices. They said strict European Union consumer-protection rules prevent operators from increasing the price of packages already sold, meaning the new GST would have to be absorbed entirely by operators, directly reducing their margins.

They also warned that smaller tour operators will face significant losses due to the increased tax, as compulsory GST registration for all foreign agents, regardless of the scale of business, creates a disproportionate administrative burden for small operators.

Therefore, EDV and SETO said existing bookings should be treated under the previous regime, and concessionary arrangements should be made to avoid penalising operators who cannot legally reprice sold packages. The associations also urged MIRA to postpone implementation to 2027, allowing sufficient time for extensive consultation with the industry and for foreign operators to adapt their systems.