Maldives allows virus-hit tourism businesses to pay tax in local currency

Authorities in Maldives have allowed tourism businesses struggling due to the downturn caused by the coronavirus pandemic to pay the Goods and Services tax (GST) in local currency instead of US dollar.

The temporary relief measure is available for the GST collected from tourists between April 1 and September 30.

What is the GST?

GST is charged on the value of goods and services supplied in the Maldives.

The Goods and Services Tax Act makes a clear distinction between suppliers of tourism goods and services, and suppliers of other general goods and services.

For general businesses, GST is charged at six per cent and can be paid in Maldivian rufiyaa. Businesses in the tourism sector have to collect the GST at 12 per cent and pay it in US dollar.

Businesses collect the tax from customers and deposit the sum with the Maldives Inland Revenue Authority (MIRA) either monthly or quarterly.

MIRA had in April extended the deadline for GST payments for the first quarter of the year after capital Male was placed on lockdown to contain the spread of the coronavirus.

The new deadline falls on July 23.

The temporary relief measure follows similar steps taken by the Maldivian authorities to soften the blow of tourism businesses.

Resorts had been granted a lease rent deferral for the last six months of the year.

The Maldives is preparing to reopen its borders to visitors in July.

The country’s tourism ministry has drafted and invited comments from industry stakeholders on its own guidelines on reopening the borders.

The coronavirus outbreak has hit the Maldivian economy hard, as travel restrictions and other preventive measures affect the country’s lucrative tourism industry, which contributes the bulk of the island nation’s state revenue and foreign reserves.

All international airlines have suspended scheduled operations to the Maldives, as the island nation enforced a blanket suspension of on-arrival visa in late March in a bid to combat the spread of the novel coronavirus.

Before the pandemic, the government had been bullish about tourism prospects, targeting two million, high-spending holidaymakers this year after last year’s record 1.7 million.

However, tourist arrivals saw a year-over-year decline of 22.8 per cent in the first 10 days of March. Officials say the number of tourist arrivals to the Maldives could drop by half in 2020.

With arrival numbers falling and the visa suspension in effect, several resorts across the Maldives had been closed.

Tourism has been the bedrock of the Maldives’ economic success. The $5 billion-dollar economy grew by 6.7 per cent in 2018 with tourism generating 60 per cent of foreign income.

However, the government is at present projecting a possible 13 per cent economic contraction this year — an estimated $778 million hit.

On March 8, Maldives reported its first cases of the novel coronavirus, as two hotel employees tested positive for Covid-19 at a luxury resort in the archipelago.

Eighteen more cases — all foreigners working or staying resorts and liveaboard vessels except five Maldivians who had returned from abroad — were later identified.

A six-case cluster of locals, detected in capital Male on April 15, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 2,094.

Eight deaths have been reported and 1,670 have made full recoveries.

The Maldives announced a state of public health emergency on March 12, the first such declaration under a recent public health protection law.

The public health emergency declaration allowed the government to introduce a series of unprecedented restrictive and social distancing measures, including stay-at-home orders in capital Male and its suburbs, a ban on inter-island transport and public gatherings across the country, and a nationwide closing of government offices, schools, colleges and universities.

Non-essential services and public places in the capital such as gyms, cinemas and parks were also shut.

Restaurants and cafes in the capital were asked to stop dine-in service and switch to takeaway and delivery.

A nationwide shutdown of all guesthouses, city hotels and spa facilities located on inhabited islands was also ordered.

These measures allowed authorities to contain the outbreak.

More than half of the people who contracted the virus have recovered and daily recoveries have over taken the number of new infections detected per day.

The restrictions are now being eased in phases, with the second phase lasting at least until June end.

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