The legal system of the Maldives is a combination of civil and common law traditions aligned with the principles of Islamic law. Under Section 10 of the Constitution of the Maldives, Islam is the state religion and all laws are based on it. This means no law which is inconsistent with the principles of Islam may be enacted. This hybrid system has enabled the Maldives to preserve its Islamic ethos while modernising its legal framework. While much of the legal framework is now covered by statutes, where there is a gap, it may be supplemented by either Islamic law or common law, with precedence given to Islamic law.

The judicial system of the Maldives is organised into three tiers. The Supreme Court of the Maldives is the highest court in the country and has original jurisdiction, inherent jurisdiction, appellate jurisdiction and advisory jurisdiction. The Supreme Court’s decisions are final and binding on all other courts. Under the Supreme Court Regulation 2020, a Supreme Court decision may be reviewed in limited circumstances, where an applicant is able to show there has been a blatant disregard for the law or there has been a gross injustice.

The High Court of the Maldives is below the Supreme Court and has original jurisdiction and appellate jurisdiction. The High Court hears appeals from superior and lower courts and tribunals.

The third tier of the judicial system consists of first instance superior and lower courts along with tribunals. These include the Civil Court, the Criminal Court, the Family Court, the Juvenile Court, the magistrate courts, the Employment Tribunal and the Tax Appeal Tribunal. All courts apart from the magistrate courts have specific jurisdictions. The magistrate courts have jurisdiction to hear civil, family and criminal matters.

Approval of Foreign Investments

Under the Law on Foreign Investments in the Maldives (Law 25 of 1979) (the “FI Act”), all foreign investments require prior approval, with the primary mandate being granted to the ministry of tourism in respect of foreign direct investments (FDIs) in the tourism industry, and the ministry of economic development and trade (MED) for all other foreign investments. With 100% foreign ownership permitted in the tourism resort development, operation and management, the current FDI Policy issued by the MED on 11 February 2020 sets out the permitted proportion of foreign investment ownership in all other areas and extensively addresses the guidelines, requirements and application processes relating to FDIs in the Maldives.

The FDI Policy describes the entry requirements for all types of investments and highlights the areas which are open, closed and negotiable for FDIs. However, the requirement to obtain approval applies to all FDIs regardless of the nature or type of investment. The FDI Policy establishes:

• the automatic approval route for sectors and activities in which the criteria are set out in the FDI Policy; and
• the sectors and activities that require negotiation for approval based on the criteria described in the FDI Policy.

Any foreigner interested in investing in a business activity that is not addressed in the FDI Policy must seek government approval to determine if the proposed investment may be allowed. FDIs are not permitted in retail trade in the Maldives.

Prior Approval

Approval for the FDIs must be obtained prior to the foreign investor engaging in business in the Maldives. Upon approval being granted, the foreign investor must register the business in line with the Business Registration Act of the Maldives (Law 18 of 2014) (the “Business Registration Act”) before business commences. A foreign corporate entity may establish its presence by way of re-registration of the foreign company or incorporation of a new company under the new Companies Act of the Maldives (Law 7 of 2023) (the “Companies Act”).

Additional incentives for FDI are offered through the Special Economic Zones Act of the Maldives (Law 24 of 2014) (the “SEZ Act”) which outlines special rights and incentives for investing in areas declared as special economic zones.

Approval Criteria

A foreign person or entity seeking to make an investment in the Maldives must have their financial status confirmed by a bank or an institution acceptable to the government of the Maldives. A letter of financial credibility issued by a financial institution licensed by the Central Bank of the applicable jurisdiction for the shareholders must be submitted for each shareholder. This step is required for both individual and legal entities.

The FDI Policy specifies the minimum initial investment requirement amounts for all areas of investment for a period of five years, starting from USD250,000 and going up to USD5 million. The policy also specifies minimum shareholding percentages, foreign investment agreement duration and the entry routes for FDIs.

Minimum shareholding requirements, initial investment values, duration of agreement and entry routes depend on the investment sector and activities. There are several sectors where the above-mentioned criteria are not specified and have to be negotiated when obtaining approval.

The routes for investments in various sectors are specified in the FDI Policy, which also provides maximum percentages of shareholdings, minimum initial investment requirements and maximum foreign investment agreement duration. The automatic approval route available for applications which reflect a commitment to meet the investment requirements and shareholding percentages provided in the FDI Policy is fairly straightforward and fast. Where the government approval route applies, the approval is not guaranteed due to sensitivities involved in the proposed investment sector.

The approval of a foreign investment application takes two to 14 working days from the date of submission of completed documents, depending on the route of application. Business registration after obtaining the approval takes one business day.

Steps

There are certain stages involved in obtaining approval for a foreign investment along with a registration process to establish a business entity under the regime governed under the FI Act.

• Filing a foreign investment application – a foreign investment application must be filed at the MED. Investors who wish to discuss their proposal prior to submitting the application may do so via walk-in meetings.
• Receiving approval for foreign investment – an approval will be granted for the requested proposal in consultation with relevant stakeholders and in accordance with applicable laws and regulations. The MED issues an acceptance letter to foreign investment approval applicants.
• Registration of the business entity – a decision on the type of business must be made at the stage of filing the foreign investment application in order to register the business which is subject to getting approval for the proposed business.
• Signing the foreign investment agreement – once the foreign investment is registered as a business entity, the foreign investment agreement outlining the terms and conditions relating to carrying out the proposed business in the Maldives must be signed with the ministry of economic development & trade.
• Obtaining licenses and permits – operating licences or permits may need to be obtained depending on the business activities undertaken.

Fees

An administrative fee is required to be paid to the Maldives Inland Revenue Authority (MIRA) upon receiving approval and before signing the investment agreement.

Non-compliance

Although specific penalties are not imposed for different acts of non-compliance, under the FI Act, where a foreign investor fails to comply with the laws of the Maldives, the government may close the investment and terminate the investment agreement. The capital belonging to an investment which is closed by the government will be permitted to be taken abroad in a manner determined upon negotiation between both parties.

Additionally, as foreign investments are required to obtain prior approval under the Business Registration Act, a foreign investor who fails to comply with this requirement will be subject to a fine of between MVR1,000 and MVR10,000.

Minimum Investment Requirements

Capital requirements for FDIs are based on the nature of the investment and are specified in the FDI Policy. Investors need to meet the initial investment requirements depending on the business activity intended to be undertaken. There are various business activities with set minimum initial investment values ranging from USD250,000 to USD5 million. Business activities which do not have a set initial investment amount are available for negotiation.

Foreign Shareholding

The maximum foreign shareholding percentage also depends on the business activity. The percentages of foreign shareholdings range from 40% to 100% based on the proposed business activities by the investors. Activities that do not have a specified minimum initial investment value do not have a maximum percentage of foreign shareholding determined and the shareholding percentage for these activities may be negotiated.

Investors proposing to conduct multiple business activities are required to maintain the lowest percentage of foreign shareholding among the approved class details and must ensure that the total amount of initial investment requirement is met within the first five years.

Neither the applicable law nor the FDI Policy address the possibility of appealing a decision to reject a foreign investment application. To date, there are no precedents available on this issue. However, there is a legal right to seek judicial review of any administrative decision, if legal recourse is desired by a prospective investor.

In the Maldives, the most common forms of corporate vehicles are companies and partnerships. Another form of vehicle used for conducting business is a cooperative society. Any person who wishes to conduct any business in the Maldives must register their business under one of these types of corporate structures. Unlike all other forms of corporate structures, which can be utilised to conduct any type of business, cooperative societies can only be formed to achieve common economic and social needs shared by a group of individuals within a society.

Companies registered in the Maldives, including re-registered foreign entities are regulated by the Companies Act. Partnerships are regulated by the Partnership Act of the Maldives (Law 13 of 2011). There are regulations made under the relevant Act which also regulate matters relating to each corporate entity. There is a distinct law relating to cooperative societies as well.

Companies

The following types of company can be incorporated in the Maldives.

Private companies

Private companies are companies where shares are privately held and the selling of shares to the public is prohibited. The minimum number of shareholders in a private company is one and the maximum number is 50. There is no minimum share capital requirement for private companies.

Public companies

The general public have the right to subscribe to shares, debentures or bonds in publicly traded companies. The number of shareholders in a public company is unlimited. There is also no minimum share capital requirement for public companies. However, if the public company is going to be listed on the Stock Exchange before listing, they must have an issued and paid up capital of at least MVR10 million.

State-owned companies

State-owned companies are companies incorporated under a Presidential Decree or by legislation and where all the shares are owned by the government.

Local authority companies

Local authority companies are companies incorporated by local councils to conduct business activities which benefit citizens under the purview of the secretariat.

Foreign investment companies

Any company where one or more shares are held by a foreign individual or a foreign company or a partnership is considered a foreign investment company in the Maldives. A foreign investment company can be a private or public company. Foreign investment companies are subject to the FI Act. Certain designated sectors are open for foreign investment companies to conduct business with 100% foreign shareholding, while restrictions such as foreign shareholding percentage apply in other areas.

Re-registered companies

Foreign registered companies including foreign registered cooperations, charities, foundations and other types of entities can re-register in the Maldives and conduct business operations. Like foreign investment companies incorporated in the Maldives, re-registered companies are subject to the same restrictions regarding the areas in which they can operate. Every re-registered company is required to appoint an agent in the Maldives who is accountable to the Registrar of Companies in relation to fulfilling all obligations under the Companies Act. Additionally, the agent will bear personal responsibility for all actions taken against the re-registered entity under the Companies Act.

Liability of Members of Company

The shareholders of the company are only required to be liable towards the company:

• to the extent of the value of any unpaid shares held by them;
• in a manner clearly specified in the constitutional documents of the company; and
• any other manner specified in the Companies Act.

Directors

Only Maldivians are eligible to be directors in companies, with the exception of foreign investment companies, State-owned companies and public companies with government shareholdings,

At least one director must be resident in the Maldives. A person is deemed as generally residing in the Maldives if that person resides in the Maldives for 183 days or more within a 12-month period.

Partnerships

The following types of partnerships can be incorporated in the Maldives.

• General partnership – the liability of the partners is unlimited and the members are liable for all losses and debts of the partnership. In this form of partnership only individuals can become partners.
• Limited liability partnership – the liability of the partners is limited to the extent of any unpaid capital of the shares which they have subscribed to. Both individuals and corporate entities can become partners in this type of partnership.

In both general and limited liability partnerships, there are no legislative restrictions on the number of partners. The maximum number of partners will be determined in the partnership agreement.

To incorporate a private company or partnership, a name for the business needs to be reserved and relevant documents specified in the relevant Act and regulations lodged with the Registrar of Companies.

The incorporation process can be completed online. If all requirements are satisfied, the registration will be completed within one to two business days and a certificate of registration will be issued which will be conclusive evidence of the registration in accordance with the applicable laws of the Maldives.

Reporting

All private companies in the Maldives are required to report the following changes to the Registrar of Companies to register the changes in the register maintained by the Registrar.

• Amendments to the memorandum or articles of association of the company – within 30 days of adoption.
• Changes to the directors and managing director of the company – within 15 days of such change.
• Changes to the authorised share capital of the company – within 30 days of such change.
• Transfer of shares of the company, allotment of shares and any changes to the shareholding of the company – within 15 days of such change.
• Charge over the shares of the company – within 30 days of such creation.
• De-registration of the charge over the shares – within 30 days of release of the charge.

The directors report and financial statements of the company need to be submitted to the Registrar within 15 days of the date of the annual general meeting of the company or within another deadline determined by the Registrar.

Disclosure Obligations

The shareholders of the company must provide the details of the beneficial owner of the shares to the company. The company has to verify the accuracy of this information and maintain a register of beneficial owners of the shares of the company.

Significant beneficial owners are considered members of the company and are considered to hold a minimum 25% shareholding in the company, whether directly or indirectly and possess voting and dividend rights corresponding to that shareholding. Anyone who has the right, whether directly or indirectly, to exert influence and control over financial and strategic decisions of the company will also be considered to be a significant beneficial owner.

The company also has to submit details of the significant beneficial owners to the Registrar of Companies within 30 days of the receipt of the information.

Private Companies

Private companies registered in the Maldives are managed by the board of directors of the company. All companies are required to appoint a managing director from among its directors. The managing director will be a full-time officer of the company and will be responsible for the management of the company under the guidance of the board of directors.

The directors can use their discretion to delegate their powers, duties and responsibilities to a director’s committee, an individual director or an employee of the company, in a manner determined by the board of directors, provided the delegation is not prohibited by the company’s constitutional documents. Even with the delegation of the powers, the directors will still remain accountable for the actions of the delegate.

Partnerships

In all partnerships registered in the Maldives, a managing partner has to be appointed. The managing partner is responsible for managing and overseeing all matters relating to the partnership according to the partnership agreement.

Companies registered in the Maldives after registration acquire separate legal personality distinct from its members, directors and officers. However, this is not absolute and the Companies Act provides that if the company has committed a fraud and dishonest actions and if the shareholders, directors or officers of the company have used the company for personal gains, the corporate veil of the company may be pierced and the directors, shareholders and officers of the company may be held personally liable.

Specific responsibilities are imposed on the directors of a company under the Companies Act. If the directors fail to comply with those responsibilities, they commit an offence and can be penalised.

There is also an obligation on the shareholders to disclose the beneficial owners and if they fail to disclose these details, they are deemed to commit an offence and can be penalised.

The Companies Act also recognises situations where the company will be considered to be committing a criminal offence. These circumstance are where the company submits false information, submits forged documents to the Registrar of Companies or obstructs an inspection conducted by the Registrar of Companies or someone delegated by the Registrar.

Laws

Employment Act

The law that determines the fundamental principles relating to employment in the Maldives, the rights and obligations of employers and employees and all other matters relating to employment is the Employment Act of the Maldives (Law 2 of 2008) (the “Employment Act” as amended). The Employment Act applies to both private and public sector employees. The Employment Act also provides that it will not apply to any other persons exempted from it by any other statute. At the time of writing, the only parties exempted from the Employment Act are the police and armed forces.

Other related laws

Other laws relating to employment are as follows.

• The Industrial Relations Act of the Maldives (Law 1 of 2024) (the “Industrial Relations Act”) – this Act lays out a detailed framework relating to the formation of trade unions and employer organisations participating in these trade unions as well as mediation between workers, employees and employers. It applies to both public and private sector employees and employers, except for the parties exempted from the Act by any other statute and the police, armed forces and Presidential appointees.
• The Occupational Safety and Health Act of the Maldives (Law 2 of 2024) (the “Occupational Safety and Health Act”) – this Act provides for matters relating to safeguarding workplaces and workers, and employee health and safety. The Act provides that except for the parties exempted from the Act by any other statute, it is applicable to both public and private sector employees, employers and independent contractors.
• The Prevention of Sexual Abuse and Harassment Act (Law 16 of 2014) – this Act outlines what constitutes sexual abuse and harassment and the responsibilities of employers in preventing these acts in the workplace.

Regulations

There are regulations enacted pursuant to the Employment Act which have the force of law. They provide more details regarding specific matters. The regulations currently in force are as follows.

• General Regulation on Employment (Regulation 2021/R-63) – this provides details relating to redundancy, working hours and overtime of employees as well as salary payment and wages.
• Expatriate Employment Regulation (Regulation 2023/R-111) – this provides details relating to the employment of expatriates.
• Employment Agency Regulation (Regulation 2022/R-63) – this provides details relating to employment agencies.
• Service Charge Regulation (Regulation 2021/R-41) – this provides details relating to the collection of a service charge from businesses and the distribution of a service charge among employees.

Precedents

The precedents set by higher courts in the Maldives relating to employment cases are considered the authority for deciding subsequent cases with similar facts. They also play a key role in determining the relevant employment relationship rules when the law or regulations are silent on the issue.

Employment Contract

The Employment Act requires the execution of an employment contract between the employer and employee. The employer may grant the rights to a greater extent than provided for in the Employment Act. Any provision in the employment contract that prevents or impedes any rights or benefits conferred to an employee by the Employment Act will be void.

Collective Bargaining Agreements

The recently enacted Industrial Relations Act allows for trade unions to initiate collective bargaining with employers by appointing representatives. Collective agreements reached after the collective bargaining must be registered with the director-general of industrial relations and the terms of the agreements are binding on the parties to the agreements and are legally enforceable.

Form of Employment Contracts

The law of the Maldives requires a written employment contract to be executed between employers and employees. The Employment Act stipulates certain provisions have to be included in the employment contract.

Types of Employment Contracts

Employers in the Maldives may enter any of these types of employment contract.

• Indefinite term contract.
• Definite term contract.
• Specific to a certain type of work, or project-based.

Duration of Employment Contracts

The duration of a definite term employment contract will not exceed a maximum period of two years. If a definite term contract is extended so that the total duration of employment is more than two years, or if it can be deemed from the actions of both parties that such a renewal or extension has occurred it will be deemed an indefinite term employment contract.

An employment contract of definite term or specific to a certain type of work is also deemed an indefinite term employment contract if the objective or result of the employment agreement is such that the employee is required to continue carrying out duties and responsibilities which are usually and normally carried out at the place of work on a permanent basis.

Working Hours

The normal working hours of an employee must not exceed 48 hours per week. The normal working hours do not include any overtime an employee works. The Employment Act specifies certain categories of employees exempt from the normal working hour limitations.

Employees employed in certain specific sectors specified in the Employment Act, may have to work two additional hours per day beyond the normal working hours limitation, as outlined in the employment agreement, provided they are compensated for the additional hours as overtime.

There is no limitation on the maximum number of hours an employee may be required to work per day. However the minister designated to oversee the implementation of the Employment Act has the discretion to formulate a regulation that imposes a maximum number of hours an employee may be required to work per day. As of now, no such regulation has been formulated.

The general rule is that employers are prohibited from requiring an employee to work for more than six consecutive days without granting a break of 24 hours. However, there are exceptions to this rule where employees working in certain sectors may be required to work for more than six consecutive days without a break, provided they are granted rest days in lieu of every day worked beyond the six consecutive days which can be accumulated and utilised thereafter.

Overtime

Employers are prohibited from requiring employees to work overtime unless it is specified in the employment contract. Any work carried out as overtime must be paid at the following hourly rates.

• Overtime on a normal working day – 1.25 times an employee’s regular hourly wage.
• Overtime on a Friday or a public holiday – 1.5 times an employee’s regular hourly wage.

Termination of Employment Contracts

After the Employment Act came into force in 2008, the Maldives abolished employment at will. Currently, for an employment contract to be terminated, there must be a reasonable cause. There are three types of dismissals recognised in the Maldives.

• Dismissal with notice – this type of dismissal is allowed after showing appropriate cause as to failure to maintain work ethics or inability to carry out employment duties and responsibilities related to the proper functioning of their place of work even after measures have been taken to discipline the employee or upgrade skill deficiencies.
• Summary dismissal – this is where an employee is dismissed without notice when an employee’s work ethics are deemed unacceptable and further continuation of employment is likely to be detrimental to the employer or to the workplace.
• Redundancy – this is considered as a reasonable cause for dismissal of an employee in the following circumstances:
1. closure of the business and services of the employer;
2. redundancy due to restructuring of the business; and
3. financial distress.

In the case of dismissal, the onus is always on the employer to show the cause.

Severance Pay and Notice of Termination

Severance pay does not have to be paid to employees in the event of dismissal from employment. In the event of dismissal with notice, the employer has to give notice to the employees based on the employee’s length of service and the employer has the discretion to terminate the employment immediately by paying the employee’s salary in lieu of any required period of notice together with any accrued holiday pay up to the date notice is given.

In the case of redundancy, no obligatory compensation or redundancy pay has to be paid to the employees who are made redundant. However, the Employment Act obliges the employer to give notice of dismissal to the employees being made redundant based on the employee’s length of service. The employer is granted discretion to pay the employee’s salary in lieu of the required notice.

Based on the employment duration, the notice period or payment in lieu of notice period is as follows.

• Less than one year – one month.
• Between one year and four years – a minimum of two months.
• More than four years – a minimum of three months.

Collective Redundancies

In the Maldives, the laws and regulations do not differentiate between collective redundancies and individual redundancies. The same procedure laid down in the relevant laws and regulations needs to be followed in conducting redundancies if it’s a single person redundancy or collective redundancy.

The Maldives High Court has set a precedent on the matter stating that as there are no laws or regulations that provide that redundancy procedures are different for individual redundancies and collective redundancies, unless limited by a law or by the employment agreement, the procedures laid out in the laws and regulations need to be fulfilled regardless of the number of persons being affected by redundancy.

Before terminating any employees for redundancy, the employer has to first notify the employees that there might be circumstances where an employee or employees might have to be made redundant or the decision to make the employees redundant has been made. This notification will include the policy relating to the determination of the employees who will be dismissed. Before the dismissal of any employees for redundancy, the employer has to take measures to avoid termination or to minimise the number of employees affected, as much as the circumstances allow.

The employer is also required to establish a policy outlining the criteria for determining the employees who will be made redundant and this policy has to be communicated to the employees. This policy, at the very least, has to consider:

• the service duration of the employee;
• the employee’s skills, education and experience required for the job;
• the employee’s attendance and disciplinary records; and
• the criteria for fulfilment of job duties or staff appraisal.

The employees that will be made redundant must be determined according to the policy and in good faith and in a fair manner.

There is no law in the Maldives that stipulates it is mandatory for employees to be represented in employment related matters. However, the Industrial Relations Act provides that employees can register trade unions and that they have the right to take part or not take part in the activities of the trade unions including the implementation of collective bargaining or strikes through the unions.

The trade unions have the right to commence collective bargaining with employers and initiation will not be aimed at securing rights or gaining advantage for a particular individual in the union. Generally, unions are restricted from utilising unions in a manner that is not in the interests of members or where members have conflicting interests.

The employers have to commence collective bargaining negotiations if the union making the request represents the majority of the employer’s employees.

The Employment Act only mandates for employees to be informed by the employer in the event of a redundancy situation.

The Occupational Safety and Health Act mandates employees have to be informed by the employer in the following circumstances.

• Any health and safety policy amendments.
• Regularly updating the employees on safety measures relating to machinery, equipment, plants and other instruments used in the workplace by employees.

There are no circumstances where it is mandated for the employers to consult employees.

Employee Withholding Tax

Under the Income Tax Act of the Maldives (Law 25 of 2019) (the “Income Tax Act”), employee withholding tax is applicable where an employer pays remuneration to an employee, whether in cash, annuities, in-kind benefits or any other form. Employers must deduct employee withholding tax from the gross amount of each payment made monthly at the following rates:

• 5.5% (if remuneration is more than MVR60,000 but less than MVR100,000);
• 8% (if remuneration is more than MVR100,000 but less than MVR150,000);
• 12% (if remuneration is more than MVR150,000 but less than MVR200,000); and
• 15% (if remuneration is more than MVR200,000).

Social Charges

Under the Pensions Act (Law 8 of 2009), both employers and employees have to contribute to the Maldives Retirement Pension Scheme. Both have to contribute a minimum of 7% of the pensionable wage (basic salary).

Participation in the Maldives Retirement Pension Scheme is mandatory for all local employees aged between 16 and 65. Foreign employees within the same age bracket have the option to voluntarily register and contribute to the Maldives Retirement Pension Scheme.

Taxes Applicable to Businesses

Income tax

Under the Income Tax Act, entities other than banks and individuals, resident in the Maldives are required to pay income tax. For income tax purposes, a company is deemed resident if it is incorporated, has its head office, or central management and control in the Maldives. Partnerships are deemed resident if it is incorporated and has its head office in the Maldives.

Entities other than banks and individuals, are taxed at the rate of 15% where taxable income exceeds MVR500,000.

Non-resident withholding tax

Under the Income Tax Act, income derived from the Maldives by non-residents is subject to a tax rate of 10% on the gross amount of income received by them. Non-resident withholding tax is payable on rent in relation to immovable property situated in the Maldives, royalties, interest, dividends, fees for technical services, commissions paid in respect of services supplied in the Maldives and insurance premiums paid to insurers.

Payments to non-resident contractors are subject to withholding tax at the rate of 5%.

Employee withholding tax

See 5.1 Taxes Applicable to Employees/Employers.

Goods and services tax

Under the Goods and Services Tax Act (Law 10 of 2011), businesses operating in the general sector are currently required to pay goods and services tax (GST) at the rate of 8% to MIRA and businesses operating in the tourism sector are required to pay a tourism goods and services tax (T-GST) at the rate of 16% to MIRA.

Businesses importing goods to the Maldives and suppliers of tourism goods and services are required to register for goods and services tax. Businesses that do not fall within the criteria are only obliged to register where the value of their supplies exceed MVR1 million per annum.

Green tax

Under the Tourism Act of the Maldives (Law 2 of 1999) (the “Tourism Act”), the green tax, as mandated by the Tourism Act, applies to tourists staying at various types of accommodations such as tourist resorts, integrated tourist resorts, resort hotels, tourist hotels, hotels, tourist guesthouses and tourist vessels. It is the responsibility of the establishment operator to collect the green tax from tourists and remit it to MIRA.

Tourists staying at tourist resorts are required to pay USD6 per day. Tourists staying at hotels and tourist guesthouses that are located on inhabited islands and have less than 50 rooms are required to pay USD3 per day.

OECD Two Pillar solution

The Maldives is a member of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPs). The Maldives has committed to implementing the OECD Two Pillar solution too but has not yet done so.

Tax Incentives Under the Special Economic Zone Act

The SEZ Act classifies various zones, including industrial estates, export processing zones, free trade zones, enterprise zones, free ports, single factory export processing zones, centres providing offshore financial services and high technology parks as special economic zones. Under the SEZ Act, zone developers are guaranteed the following incentives:

• relief from import duty on capital goods;
• relief from goods and services tax for the first 10 years; and
• relief from withholding tax for the first 10 years.

The SEZ Act provides similar concessions to individuals investing in SEZs, with the extent of these benefits depending on the industry and type of investment.

Special Exemptions Provided Under the Income Tax Act

Under Section 12-1 of the Income Tax Act, the President, under specific circumstances, can exempt income from certain business projects or industries from tax.

The determination of eligible projects or industries is made by the President, with advice from the Cabinet of ministers and published in the government gazette.

Exemptions are granted for a specific period and take factors such as revenue impact, economic and social impact and the attainability of objectives into account.

A list of exempted persons and the reasons for exemption need to be published in the government gazette.

Foreign Tax Credit

Under Section 72 of the Income Tax Act, residents paying taxes abroad can deduct either the amount of foreign tax paid or the tax payable in the Maldives on the net foreign sourced income, whichever is lower.

Deductions are applied separately with respect to each type of income and each country or territory from which each type of income was derived.

Deductions must be claimed within two years after the end of the accounting period and adjustments can be made within two years of any tax payable adjustments.

Tax Treaties

Tax credits are also applicable under any double tax avoidance agreement (DTAA) and are deducted in accordance with the provisions of the Tax Administration Act of the Maldives (Law 3 of 2010) (the “Tax Administration Act”).

The Maldives has signed a DTAA with the United Arab Emirates, effective from 1 January 2017. The Maldives is also a party to the SAARC Limited Multilateral Agreement on Avoidance of Double Taxation and Mutual Administrative Assistance in Tax Matters, which came into force on 1 January 2012 in the Maldives.

The DTAA between Maldives and Bangladesh will come into force on 1 July 2024, while the DTAA with Malaysia which was signed last year has not yet come into force.

Tax consolidation for the purposes of tax calculation and deduction by a group entity is not available under tax laws in the Maldives.

Parent companies are required to submit consolidated accounts including their subsidiary companies, as they are considered group entities under the Income Tax Regulation. However, under the Income Tax Act, group entities are required to divide the tax-free threshold of MVR500,000 among themselves, for the purpose of determining the tax bracket for taxable income as a group. Companies within a group therefore cannot benefit from the tax-free threshold as individual companies, as they are grouped together to calculate the taxable bracket.

Under the Income Tax Regulation, each entity in the group is required to prepare and submit separate income tax returns.

Thin capitalisation rules are implemented under Section 71 of the Income Tax Act.

Where the total amount of interest paid, exceeds the interest capacity of a person (30% a person’s tax EBITDA) for that period, the excess amount cannot be deducted in the computation of taxable profit of that person for that period, except where interest is paid to a bank licensed under the Banking Act of the Maldives (Law 24 of 2010) (the “Banking Act”) or to an insurance business or finance leasing business or housing finance business licensed under the Monetary Authority Act of the Maldives (Law 6 of 1981) (the “Monetary Authority Act”).

The following taxpayers are exempt from thin capitalisation rules.

• Commercial banks licensed under the Banking Act.
• Insurance businesses or finance leasing businesses or housing finance businesses or non-banking financial institutions licensed to conduct financing business under the Monetary Authority Act.
• Persons categorised as micro, small or medium-sized businesses under the Law on Small and Medium Enterprises (Law 6 of 2013).
• State-owned enterprises (SOEs), of which the government of the Maldives directly holds a majority of the ordinary share capital.

Under Section 67(a) of the Income Tax Act, where an arrangement or transaction is entered into between parties under the following circumstances, the taxable income will be computed in accordance with the arm’s length terms, irrespective of the actual terms of the arrangement or transaction.

• The arrangement or transaction was entered into between two persons who were associates.
• The terms on which the arrangement or transaction was entered into between the persons were not arm’s length terms.
• If the income of one person involved in the transaction would be higher than under arm’s length conditions.
• If any deduction allowed to one person would be lower than under arm’s length conditions.
• If any loss incurred by one person would be less than under arm’s length conditions.
• If any tax credits available to one person would be less than under arm’s length conditions.

General Anti-Avoidance Rule (GAAR)

Section 66(a) of the Income Tax Act grants the Commissioner General of Taxation the authority to invalidate any arrangement or transaction, where the Commissioner has reasonable grounds to suspect that an arrangement or transaction was entered into for the purpose of tax avoidance or reducing tax liability either by issuing an assessment under Section 39 of the Tax Administration Act or by other means.

Reasonable grounds for action by the Commissioner General highlighted under Section 128-1 of the Income Tax Regulation (Regulation 2020/R21) include:

• carrying out of a transaction which lacks a bona fide commercial purpose;
• carrying out of a transaction which lacks economic substance;
• abuse of organisational form; and
• recharacterisation of an arrangement or transaction.

The Maldives introduced a Competition Act (Law 11 of 2020) (the “Competition Act”) in 2020 and it officially came into force on 31 August 2021. The Competition Act defines “merger” as:

• the merger of two or more legal entities that were previously independent; and
• the acquisition of direct or indirect control over all or part of the assets and goodwill of an entity through a joint venture agreement.

The Competition Act requires the criteria to determine whether a merger infringes the principles of mergers under the Competition Act to be formulated and published by the ministry of economic development and trade within six months from the date on which the Competition Act came into force. However, to date the ministry has not published any such criteria, leaving uncertainty over what the ministry considers an anti-competitive merger either in terms of revenue or market share.

Unlike other jurisdictions, the current legal framework for merger control in the Maldives does not mandate notification of mergers to the minister of economic development and trade or provide an option for voluntary notification of mergers. However, this may change once the necessary regulation for merger control is published by the ministry.

Where a merger contravenes the Competition Act’s provisions, the minister of economic development and trade has the authority to issue an order to amend a merger agreement and levy a fine of between MVR10,000 and MVR100,000. Following the order by the minister, the Registrar of Companies reserves the right to deny any service to the parties involved that could aid the execution of the merger agreement.

The Competition Act prohibits business agreements or conduct that hinders, limits or distorts competitive practices within a market. The Competition Act considers the following types of agreements or conduct as anti-competitive practices:

• price fixing;
• market divisions and customer allocations;
• intentional limitation in production of goods and development of technology;
• refusal to sell or deal with certain parties; and
• control of investments.

If the ministry of economic development and trade determines that a business has exploited or abused its dominant position in the market, the ministry has the authority to impose a fine of between MVR10,000 and MVR100,000.

The ministry of economic development has not taken any enforcement action against businesses for an anti-competitive agreement or practice to date.

The Competition Act assesses whether or not a party holds a dominant position based on the nature of the market it is operating in, its share and power in the market and the significant control it has over the market. Actions such as predatory pricing, imposing unfair prices, refusing to deal with certain parties, limiting production of goods or development of technology to the detriment of consumers, imposing unnecessary obligations which have no commercial use or are not material to the subject of the contract or imposing differing conditions to trading parties to block their entry or operation in the market could all amount to abuse of a dominant position.

If the ministry of economic development and trade determines that a business has abused its dominant position in the market, the ministry may impose a fine of between MVR10,000 and MVR100,000.

However, these enforcement powers are yet to be used by the ministry.

There is no patents legislation in place in the Maldives. Therefore there is currently no process by which a patent owner can register their patent in the Maldives.

There is no trade mark specific legislation in place in the Maldives at the moment although a trade mark bill is currently being developed by the ministry of economic development and trade. Despite this, a limited system of registration of trade marks is practiced in the Maldives.

Limited System of Registration

As a matter of practice, a business may register a trade mark with the ministry of economic development and trade of the Maldives (MED) on the basis of a business name registered by the business prior to registering the trade mark. However, only businesses incorporated or re-registered in the Maldives may register these trade marks in the Maldives.

Under Section 12(a) of the Business Registration Act, any business activity may only be undertaken in the Maldives by a registered business entity after registering a business name under which the business activity will be undertaken. Under the Business Registration Act, the Registrar of Business has discretion to refuse to register any name in the following situations.

• The name is already registered to another business or the name is believed to be similar to a name already registered.
• The name is registered as a trade mark by another party.
• The name is a famous name outside the Maldives and registration of the business name may mislead the public into believing wrongfully that the name is associated with the famous business carried on outside the Maldives.
• The name contravenes acceptable community standards.
• The name, without using any additional word or phrase, depicts only a matter, place or thing that cannot be owned by a single party.
• The name as determined by judgment of a court of law is prohibited from use as a business name.
• The name is reserved to another party.
• The name is a type of name that cannot be registered for reasons prescribed in regulation.

Given that the registration of a business name must precede the registration of a trade mark, these restrictions will apply when registering a trade mark as well.

Registration Process

Applications can be made online to reserve a business name and then to register a business name via the oneGov portal (one.gov.mv) after payment of the prescribed fee. The current prescribed fee is MVR100 per business name registered. The process of registration usually takes one to two business days. The registration of the business name will be valid for the entirety of the business entity’s registration.

Applications can be made online to register or renew a trade mark via the oneGov portal (one.gov.mv) after payment of the prescribed fee. Trade marks may be registered for the period specified in the application, provided that the minimum period is 12 months. Currently, a non-refundable fee of MVR50 per month is payable. The process of registration usually takes one to two business days.

Publication of Cautionary Notices

As a matter of practice, international businesses and trade mark owners and parties that are not incorporated nor re-registered in the Maldives in accordance with the Business Registration Act, from time to time publish a trade mark cautionary notice, announcing to the general public in the Maldives that a particular trade mark is owned by the business or trade mark owner and caution against trade mark infringement. Even though this is a very common practice, this itself does not afford legal protection against infringement or guarantee protection from unauthorised use of the trade mark in the Maldives. Publication of cautionary notices is not the same as registering a trade mark.

However, publication of trade mark cautionary notices can be used as evidence to support complaints made by trade mark owners/licensees to the MED under the Business Registration Act, against a business entity registered in the Maldives that has registered, or is using, a business name in contravention of the rights of the trade mark owner or licensee.

Remedies

If a business entity registered in the Maldives has registered, or is using, a business name in contravention of the rights of a trade mark owner/licensee, the Business Registration Act provides an opportunity for concerned parties to submit a complaint to the MED requesting it change the business name if the period of using the business name after registration of the business entity has not exceeded 12 months. If the Registrar of Business gives notice to the party to which a business name is registered or reserved to change the name, the party must do so within a period of one month from the date of notice.

If the party does not abide by the notice, the Registrar of Business has discretion to cancel the business registration of the party.

There is no specific industrial design legislation in place in the Maldives. However, designs are generally believed to be protected under the Copyrights and Related Rights Act of the Maldives (Law 23 of 2010) (the “Copyrights Act”). Please see 7.4 Copyright.

The Copyrights Act and the Regulation on the Registration of Copyright and Related Rights of the Maldives (Regulation 2011/R-16) (the “Copyright Registration Regulation”) protects copyrights and related rights in the Maldives and stipulates actions and penalties against copyright infringement.

Application

The Copyrights Act protects works produced in the Maldives as well as works produced by parties protected under any international convention ratified by the Maldives.

Protection

The following types of works are protected under the Copyrights Act.

• Literary and artistic works, particularly:
1. books, pamphlets, articles and other writings;
2. academic, literary and artistic speeches and addresses;
3. drama, musicals, stage performances, choreography, steps and other presentations and other works for stage productions;
4. poems, songs, tunes and other musical products;
5. feature films, documentary films, drama, video songs and other video-visual presentations and works;
6. works of art and architecture;
7. photographic works;
8. works of applied arts;
9. illustrations, charts, plans, sketches and three-dimensional works related to geography, topography, architecture or science; and
10. computer programs (even if represented as source code or object codes).
• Derivative works such as translations, adaptations, arrangements and other transformations or modifications of works, as well as collections of works, collections of data (databases) in whatever form and collections of expressions of folklore that are original by selection or arrangement.

Under the Copyrights Act, works are protected by the sole fact of their creation, irrespective of their mode or form of expression, or their content, quality and purpose. Protection under the Copyrights Act will only extend to originally created products or works. The following are not protected.

• Any idea, procedure, system, method of operation, concept, principle, discovery or mere data, even if expressed, described, explained, illustrated or embodied in a work.
• Any official text of a legislative, administrative or legal nature as well as any official translation of those documents.

Copyright Duration

Generally, the economic and moral rights over works are protected for the life of the author plus 50 years after the death of the author.

In the case of co-authorship, or joint authorship, the economic and moral rights are protected for the life of the last surviving author plus 50 years after the death of the last surviving author.

For collective works, other than works of applied art and audio-visual work, the economic and moral rights are protected for 50 years from the date on which the work was either made, first made available to the public or first published, whichever date is latest.

For works published anonymously or under a pseudonym, the economic and moral rights are protected for 50 years from the date the work was either made, first made available to the public or first published, whichever is the latest date.

For works of applied art, the economic and moral rights are protected for 20 years from the making of the work.

Registration of Copyright

It is not compulsory under the Copyrights Act to register the works with the relevant government authority in order to gain protection. However, parties may apply to register the works with the ministry of economic development and trade. The benefit of registration is to assist a copyright holder in legal proceedings to prove that the work in question is their creation.

Copyrights may be registered after submission of the prescribed application form to the ministry of economic development and trade and payment of the prescribed fee. Currently, a non-refundable fee of MVR1,000 is payable. The process of registration usually takes two business days.

Remedies

Right to file complaints

Under the Copyright Registration Regulation, any party may submit a complaint to the ministry of economic development and trade objecting to the registration of any products or works under the Copyright Registration Regulation. If the complainant provides evidence that the product or work registered is not the work of the registered party, the ministry of economic development and trade has the right to cancel the registration. If the ministry does not accept the evidence submitted by the complainant, the complainant may escalate the matter with the relevant courts.

Payment of fines

In the case of deliberate or inadvertent infringement of any rights protected under the Copyrights Act, the courts have the authority to levy a fine of between MVR50,000 and MVR300,000. The amount of the fine will be determined based on the damages suffered by the copyright holder or the damages that are foreseen to have been incurred on the copyright holder. If the same infringer commits a subsequent infringement within five years of the first infringement, the courts have the authority to levy a fine of up to MVR600,000.

Payment of damages

Copyright owners are entitled under the Copyrights Act to seek damages through the courts for the loss of property and the prejudice sustained as a consequence of infringement of copyright as well as the payment of expenses suffered by the copyright owner, including legal costs. The determination of the amount to be paid as damages will depend on the extent of loss suffered by the copyright owner as well as the profits attributable to the infringing party as a result of the infringement.

Court orders and injunctions

The courts have the authority to make the following orders and injunctions.

• An order for infringing copies to be destroyed in a manner which does not harm the copyright owner.
• An order for infringing material to be returned to the copyright owner.
• An order for the acts of infringement to be stopped. If the order is not respected, the courts have the authority to levy a fine of between MVR10,000 and MVR300,000, depending on the extent of the violation.
• An order for copies of works or sound recordings suspected of being made or imported without the authorisation of the copyright owner to be impounded.
• An injunction to prohibit the committing or continuation of committing of infringement of any right protected under the Copyrights Act.

Action by government authorities

The relevant government authorities are authorised to check, investigate and take necessary actions as per the civil and criminal procedures of the Maldives where there is reason to suspect infringement of the rights protected under the Copyrights Act.

As explained in 7.4 Copyright, software and databases are already protected under the Copyrights Act. There are currently no laws in the Maldives that cover other forms of IP.

Section 24 of the Constitution of the Maldives states that everyone has the right to have their personal and family life, their home and their private communications respected. It also states every one must respect these rights. Apart from this fundamental right enshrined in the Constitution, the Maldives hasn’t enacted general legislation on privacy and personal data protection to date.

See 8.1 Applicable Regulations.

See 8.1 Applicable Regulations. There is no legal entity charged with data protection at the moment.

The government proposed a bill to amend the Copyrights Act on 28 February 2024.

The bill is currently being reviewed at committee stage and proposes the following amendments.

• As well as protecting traditional forms of creative expression, there is a proposed amendment to include copyright protection on digital platforms and broadcasting mediums, such as for sound recordings and broadcasts via satellite, internet or cable.
• Extending copyright duration from 50 to 70 years for both economic and moral rights after the author’s death.
• Extending protection for works of applied art from 25 to 50 years.
• Giving owners of copyrighted works the right to seek damages, including the benefits acquired from the infringement of the copyright by the infringing party.