The Foreign Currency Act which mandates businesses with foreign exchange income to deposit or mark their earnings with banks, has officially come into effect in the Maldives.

The new legislation seeks to establish a robust legal framework for managing the import, use, possession, deposit, and distribution of foreign currency in the country.

Under the Act, all transactions, unless explicitly exempted, must be conducted in Maldivian Rufiyaa. The law also requires businesses generating foreign exchange revenues of USD 15 million or more annually to register their income with designated banks in the Maldives. Proceeds from goods and services sold must be deposited into local bank accounts.

The law introduces a three-tiered categorisation for businesses earning foreign currency, each with distinct obligations for marking and depositing their income.

Category A includes tourist resorts, integrated tourist resorts, private islands, resort hotels, and similar establishments. Businesses in this category are required to either deposit USD 500 per tourist per month or 20% of their gross monthly foreign exchange income into a bank account. Establishments are given the flexibility to choose between these two methods.

Category B encompasses tourist vehicles, tourist hotels, and guesthouses. Businesses in this group must deposit 20% of their gross monthly foreign exchange income or USD 25 per tourist per month. Similar to Category A, operators in this category may choose their preferred method for compliance.

Exemptions under both categories include tourists who stay less than 24 hours, children under 12, and guests staying free of charge.

Businesses not classified under Categories A or B, but generating at least USD 15 million in foreign exchange annually, are also required to deposit 20% of their monthly foreign exchange earnings into local banks.

As part of the transitional arrangements, the first foreign currency deposits under the new rules will be made on January 28. While the Act has already come into effect, the deposit and exchange of foreign currency will commence, under specific guidelines Monetary Authority (MMA) had issued prior to facilitate this process. MMA has been tasked with overseeing the implementation of the Act. MMA has the authority to take action against non-compliant businesses. 

The Government has introduced the Act as a measure to alleviate the country’s ongoing dollar shortage. By channelling foreign exchange earnings through banks, the Government aims to ensure a more reliable supply of US dollars for the public and businesses.