Bill giving choice of exchanging 20% of revenue in cases of low revenue passed

Parliament, on Thursday, has passed the foreign currency bill that provides the discretion to tourist establishments to exchange 20 percent of the monthly revenue if finances are low.

The foreign currency bill gives tourist establishments choice between exchanging USD 500 per tourist as currently required or exchanging 20 percent of the monthly revenue.

The government-backed bill was submitted to the Parliament with the sponsorship of ruling PNC’s parliamentary group leader, Inguraidhoo MP Ibrahim Falah.

The bill was passed with the votes of 56 MPs with just 11 MPs voting against it.

The bill was passed with revisions approved by the Public Accounts Committee. They include:

• Increasing the age limit for exemption from dollar age from 10 to 12
• Provision of exchanging foreign currency lower than 20 percent of the revenue for tourist resorts facing financial detriments, provided that the resort sufficiently proves to, and the case is subsequently reviewed by the Maldives Monetary Authority (MMA)

Notably, the Committee completed the review of the bill within the span of a day.

The foreign exchange regulation that took effect on October 1 requires tourist establishments to exchange a fixed amount of USD per tourist in local banks. Resorts are required to exchange USD 500 per tourist while guesthouses are required to exchange USD 25 per tourist.

It received pushback from tourism industry giants who argued that a fixed USD exchange requirement, regardless of room rate, duration of stay, the age of guests or special offers, is unfair to tourism establishments with varied market segments.

It also disregards the fact that many of the expenses are paid in USD.

But despite the criticism, President Dr. Mohamed Muizzu announced in a function on November 17 that he will not change the regulation, and that resorts will need to surrender USD 500 per tourist.

But on November 26, the Maldives Monetary Authority (MMA) announced the formulation of a Foreign Currency Bill. This draft bill, which was shared with tourist establishments for comment, maintained the USD 500 requirement for resorts, but also offered certain concessions in foreign currency exchange.

The final bill submitted to the Parliament gives resorts the choice between exchanging USD 500 per tourist as currently required or exchanging 20 percent of the monthly revenue.

It categorizes tourist establishments into two types.

Category-A tourist establishments are classified as registered resorts, integrated tourist resorts and private islands. Such establishments will need to either exchange USD 500 per tourist or 20 percent of the monthly revenue.

Meanwhile, Category-B tourist establishments are classified as registered tourist vessels, tourist hotels and tourist guesthouses. Such establishments will need to either exchange USD 25 per tourist or 20 percent of the monthly revenue.

Meanwhile, tourist establishments will not be required to exchange USD for tourists who spend less than 24 hours at the establishment, tourists under the age of 10 years - higher than the originally proposed two years, tourists hosted by establishments on a complimentary basis, and tourists hosted by the government.

It also requires non-tourism businesses that generate over USD 15 million in annual USD revenue – lowered from the USD 20 million proposed in the draft bill - to exchange a percentage of its monthly revenue. Such businesses will also need to register with the MMA.