First Amendment to the Foreign Currency Act Ratified into Law

/in , /by

The First Amendment (the “First Amendment”) to the Foreign Currency Act1(the “FC Act”) has been ratified into law on 31 August 2026, and is set to come into effect on 1 September 2026.

Please refer to our Overview for a comprehensive overview of the FC Act.

The First Amendment makes significant changes to the statutory framework governing foreign currency in the Maldives. Key changes include:

  1. Removal of the arrivals-based conversion option for Category A Tourism Establishments, including tourist resorts;
  2. Increase of the mandatory conversion rate for Category A Tourism Establishments and high-income entities from 20% to 40% of monthly gross sales;
  3. Increase of the revenue threshold for qualifying as a high-income entity from USD15 million to USD25 million;
  4. Shortening of the deadline for tourism establishments (both Category A and Category B) and high-income entities to satisfy their conversion obligations for each calendar month, from the 28th day of the third subsequent month to the 28th day of the immediately following month;
  5. Introduction of a requirement to obtain the prior approval of the Maldives Monetary Authority (the “MMA”) before foreign currency-earning businesses make any payments for goods and services in foreign currency, and before the suppliers of those goods and services collect such payments in foreign currency (other automatic exceptions to the MVR mandate granted to foreign currency-earning businesses under the FC Act, such as salary, dividend, shareholder and related-party payments, remain unchanged); and
  6. Introduction of express rules governing foreign currency exchange rates, including prohibitions on transactions and advertising at rates exceeding the rates or bands published by the MMA, or outside any bands determined by the MMA.

Changes to the mandatory conversion obligations applicable to tourism establishments

Before the commencement of the First Amendment, Category A Tourism Establishments2, which includes tourist resorts, were required to convert to a bank licensed in the Maldives either:

  1. USD500 for each non-exempt tourist arriving at the establishment during the relevant calendar month (the “Arrivals-Based Conversion”); or
  2. 20% of the establishment’s gross sales in foreign currency from goods sold and services provided during the relevant calendar month (“Sales-Based Conversion”).

The First Amendment removes the option to use the Arrivals-Based Conversion method and increases the Sales-Based Conversion requirement from 20% to 40% of monthly gross sales.

Increase of threshold to qualify as a High-Income Entity

Before the commencement of the First Amendment, entities other than sellers of tourism goods and services and financial institutions that received annual foreign currency revenue of USD15 million or its equivalent (“High-Income Entities”) were subject to the deposit and conversion requirements applicable to High-Income Entities under the FC Act.

The First Amendment increases this threshold from USD15 million to USD25 million.

Changes to mandatory conversion obligations applicable to High-Income Entities

The First Amendment increases the mandatory conversion obligation applicable to High-Income Entities from 20% to 40% of monthly gross sales in foreign currency from goods sold and services provided during the relevant calendar month.

Exception for High-Income Entities with 100% local ownership

An exception has also been introduced for High-Income Entities whose shareholders are exclusively Maldivian.

Such entities will be required to convert 7% of their monthly gross sales in foreign currency, rather than the standard 40% applicable to other High-Income Entities.

Deadline to satisfy mandatory conversion obligations

The deadline for satisfying monthly conversion obligations applicable to tourism establishments (both Category A and Category B) and High-Income Entities has also been shortened.

Previously, parties subject to mandatory conversion obligations were required to satisfy their obligations for a particular calendar month by the 28th day of the third subsequent month. Under the First Amendment, those obligations must instead be satisfied by the 28th day of the immediately following month.

MMA approval requirement for foreign currency payments for goods and services

Before the First Amendment, the FC Act provided an automatic exception to the general requirement for transactions in the Maldives to be carried out in Maldivian Rufiyaa in respect of, among other matters, the following transactions:

  1. Payments for goods and services in foreign currency by businesses that earn foreign currency income, where the businesses elected to make such payments in foreign currency;
  2. The corresponding collection of those payments in foreign currency by the suppliers of the relevant goods and services; and
  3. Other obligations and transactions identified in regulations to be formulated under the FC Act.

Following the commencement of the First Amendment, the transactions specified above may only be carried out in foreign currency with the prior approval of the MMA, in accordance with the relevant regulations to be formulated by the MMA.

Other automatic exceptions under the FC Act, including those relating to salary, dividend, shareholder and related-party payments by foreign currency-earning businesses, remain unchanged.

Requirement to notify the MMA of foreign currency deposit accounts

The First Amendment introduces a notification requirement for parties subject to obligations under the FC Act to transfer or deposit their monthly realised sales proceeds into a local foreign currency bank account.

Under the First Amendment, such parties must notify the MMA of the local accounts to which they deposit or transfer funds for compliance with those obligations, in the manner determined by the MMA.

The MMA is also required to determine, through regulations, an interim period or interim periods for compliance with these new notification requirements.

Increased discretion of the MMA in granting concessions

The First Amendment grants the MMA greater discretion in determining the nature of relief to be granted to applicants seeking concessions to their mandatory conversion obligations.

Previously, the MMA could permit an applicant to convert an amount lower than its statutory conversion obligation for a period determined by the MMA if the MMA believes that an applicant will not have adequate foreign currency reserves to meet its foreign currency obligations specified in the application3.

Following the commencement of the First Amendment, the MMA may instead grant relief in relation to the statutory deadline for satisfying the conversion obligation.

Concessions for conversion obligations incurred under the former regulation

The First Amendment extends the availability of concessions under the FC Act to parties with unfulfilled conversion obligations incurred under regulations made pursuant to any related legislation.

This expressly permits parties with unfulfilled conversion obligations under the former Foreign Currency Regulation4, which preceded the FC Act, to apply for concessions under the FC Act.

Exchange rate and conversion rules

The First Amendment introduces express requirements for foreign currency to be bought and sold in a manner that does not exceed any rates or bands determined and published by the MMA.

The First Amendment also prohibits:

  1. The sale or attempted sale of foreign currency by any device at a rate exceeding the rate or band determined and published by the MMA, or outside the band formally determined by the MMA; and
  2. The promotion or advertisement5 of the sale or purchase of foreign currency at a rate exceeding the rate or band determined and published by the MMA, or outside the band formally determined by the MMA.

The First Amendment provides for the following administrative fines for breaches of these prohibitions:

Breach Fine
Sale or attempted sale of foreign currency above the MMA-determined rate or band, or outside the MMA-determined band MVR25,000 to MVR1,000,000
Promotion or advertisement of the sale or purchase of foreign currency above the MMA-determined rate or band, or outside the MMA-determined band MVR25,000 to MVR500,000
Breach involving a legal entity or registered business MVR100,000 to MVR5,000,000

The First Amendment further provides that the imposition of an administrative fine under the FC Act does not prevent criminal proceedings from being initiated as well, where the conduct also constitutes a criminal offence under another applicable law.

The First Amendment requires the rules and procedures governing the imposition of these fines to be prescribed in regulations to be formulated under the FC Act.

Money-changing businesses

The First Amendment introduces an express requirement for money-changing businesses to obtain a licence from the MMA in order to be established and operate in the Maldives. The licensing framework will be governed by regulations to be formulated under the FC Act.

These regulations must also include transitional provisions for entities that held money-changing licences issued by the MMA before the commencement of the First Amendment.

The Regulation on Money Changing Businesses6 currently governing money-changing businesses in the Maldives was formulated before the commencement of the FC Act. It is therefore likely that the MMA will formulate new rules governing the establishment and operation of money-changing businesses following the commencement of the First Amendment.

Publication and amendment of regulations

The First Amendment requires the MMA to make any amendments to any existing regulations and formulate any new regulations as required by the First Amendment within 30 days from the commencement of the FC Act (i.e., by 1 October 2026).

 

References

  1. Act Number 32/2024
  2. Tourist resorts, integrated tourist resorts, private islands, resort hotels and other such establishments registered under the Tourism Act (Act Number 2/99)
  3. Provided that those obligations are recognised under the FC Act or by the MMA at its discretion
  4. Regulation Number 2024/R-91
  5. i.e., to disclose, publish, disseminate, repeat or provide information to advertise, encourage or spread, through digital devices, platforms or by any other means, the sale and purchase of foreign currencies above any rates or bands formally determined and published by the MMA or outside the bands formally determined and published by the MMA
  6. Regulation Number 2024/R-92