The legal system of the Maldives is a unique blend of civil and common law traditions established within the boundaries of Islamic law principles, as required by the Constitution of the Maldives. This hybrid system underpins the legal framework for businesses, ensuring alignment with Islamic values while accommodating modern statutory and regulatory requirements.

The Maldivian judiciary is organised into a three-tier structure, with the Supreme Court of the Maldives as the highest court, below it the High Court, which serves as an appellate body, hearing appeals from superior and lower courts as well as tribunals. The High Court’s dual original and appellate jurisdiction ensures comprehensive resolution of disputes, including those impacting businesses. The first-instance courts and tribunals form the third tier of the judicial system. These include the Civil Court, Criminal Court, Family Court, Juvenile Court, Magistrate Courts, Employment Tribunal, and Tax Appeal Tribunal. Specialised courts and tribunals, such as the Civil Court and Employment and Tax Appeal Tribunals, are aimed at providing an efficient mechanism for resolving commercial, labour and tax disputes.

In addition to its judicial structure, the Maldives has a well-defined regulatory framework designed to oversee business activities and ensure compliance. The Ministry of Economic Development (MED)is the primary regulator overseeing business registration and licensing of foreign investments. Businesses in key industries, such as tourism, fisheries, construction/real estate and banking, must comply with sector-specific regulatory requirements enforced by the relevant authorities. These include the ministry mandated for key sectors and the Maldives Monetary Authority. Each authority ensures compliance with laws and standards tailored to their respective sectors.

The Maldives Inland Revenue Authority (MIRA), established under the Tax Administration Act (Law No 3/2010) is responsible for the collection of key taxes, including Income Tax, and Goods and Services Tax (GST). As the tax regulator, MIRA is also responsible for the enforcement of tax laws, conducting risk-based audits and investigations.

The new Foreign Investment Act (Law No 11/2024), which has repealed the former 1979 law, now regulates foreign investments. The new Act came into force on 3 December 2024, and the MED is the main regulator under the new Act controlling Foreign Direct Investment (FDI) approvals and ongoing regulatory compliance.

The regulatory framework separates foreign investments into three categories:

• open areas that are accessible to foreign investors without limitation;
• restricted areas that allow investment but subject to specific conditions determined by the MED, such as limitations on foreign ownership or minimum investment thresholds; and
• areas that are fully closed to foreign investment, often due to national security concerns or for the protection of local industries.

On 3 December 2024, the MED published detailed guidelines specifying permissible foreign ownership percentages, minimum investment requirements and maximum durations for FDIs. For instance, in the manufacturing sector, foreign investors may hold up to 75% ownership in the manufacture of fish products, with a minimum initial investment of USD1 million over five years. In contrast, sectors such as retail trade are entirely closed to foreign investment.

The FDI approval process emphasises the alignment of proposed projects with national interests, focusing on factors such as the investor’s financial capability, potential for job creation, technological transfer, environmental impact, and overall contribution to the Maldivian economy. The MED is also obliged to monitor and enforce post-approval compliance, ensuring that foreign investments meet all agreed terms, which crucially entails confirmation of the incoming agreed minimum capital investment under the foreign investment agreement.

Economic Environment

Based on reports by the Maldives Bureau of Statistics, the monthly real GDP of the Maldives was MVR8,593 million in October 2024, up 10.10% compared to the previous month and up 0.8% versus October 2023. This was the lowest year-on-year growth, with January 2024 registering the highest, at 10%. 

Being a middle-income economy heavily reliant on tourism, the Maldives showed 3.4% growth in accommodation and food services compared to October 2023. The tourism sector contributes more than 20% of the growth in the economy, and continues to reflect a significant rebound after the decline in GDP due to the COVID-19 pandemic.

Key contributors to the economy remain tourism (20.9%), transport and communication (12.9%), wholesale and retail (10.0%) and real estate (8.6%). Diversification efforts are underway, focusing on fisheries, renewable energy and ICT to reduce reliance on tourism.

Political Environment

Recent years have seen relative political stability in the Maldives, which is essential for preserving investor trust. Nonetheless, the nation is still politically competitive, and policy decisions are influenced by election cycles.

Business Environment

The Maldives offers a favourable environment for foreign investment in certain sectors, particularly tourism, real estate, and renewable energy. The 2024 FI Act and the Foreign Direct Investment Policy (FDI Policy) enforced by the MED sets out the guidelines and requirements relating to foreign investment in the Maldives.

Sectors open to foreign investment, with restricted areas, closed areas and the percentages of shareholdings, allowed are stipulated in the FDI Policy. Foreign shareholdings are permitted in percentages ranging from 40% to 100%, with minimum investment requirements ranging between USD250,000 and USD5 million, based on proposed activities by investors.

The business environment is nevertheless susceptible to challenges in the form of environmental risks, including rising sea levels and extreme weather events, creating long-term challenges for investors. However, these risk factors may encourage sustainable development planning and green energy projects, aligning with global trends and investor interests.

Recent Changes in FDI Rules

The FI Act came into effect on 3 September 2024, repealing the 45 year-old Maldives Foreign Investment Act which entered into force on 1 May 1979. The FI Act aims to increase foreign investment and establish policies that will create a favourable environment to bring in the capital, technology, knowledge and skills that are essential to developing the economy of the Maldives. 

The FI Act has introduced the requirement of a foreign investment licence detailing investment particulars, and addresses investment opportunities for foreign investors, as well as eligibility, investor protection, terms of compensation and additional related provisions.

Foreign Currency Act

A law governing foreign currency transactions was recently introduced in the Maldives on 14 December 2024. The Foreign Currency Act (FCA), effective from 1 January 2025, requires all transactions carried out in the country to be conducted in Maldivian rufiyaa (MVR), with exemptions applicable to businesses earning foreign currency income, financial service providers, dealings with tourists and other general examples such as international transactions and transactions permitted under regulations to be enacted under the FCA.

The FCA lays down deposit requirements applicable to local bank accounts by tourism service providers and all entities apart from financial institutions that receive an annual foreign currency revenue of at least USD15 million. It also mandates currency-conversion obligations on tourism establishments and high foreign currency income entities.

The FCA also addressed transitional arrangements with interim provisions applicable for the period until its enactment on 1 January 2025, as well as registration requirements and reporting requirements. Penalties are applicable for non-compliance with deposit and conversion requirements, with fines ranging from 0.25% to 0.5% of the amounts to be deposited/converted for the applicable month, and ranging from MVR1,000 to MVR10,000 for other violations.

Prospects

The current economic outlook for the Maldives shows potential for development, with growth of 4.6% in GDP in the third quarter of 2024 compared to the third quarter of 2023. Increased tourist arrivals and infrastructure development are expected to drive expansion. While, politically, there may be changes in policy directions, the focus on stabilising the economy and promotion of investments is likely to remain unchanged.

In the area of foreign investments, the revised regulatory framework is expected to attract diverse investments. Climate-change adaptation strategies, supported by international funding, may also play a role in future investments.

While the country offers opportunities for foreign investment, particularly in tourism, infrastructure and renewable energy, there are challenges to be managed, such as regulatory hurdles, climate risks, and political dynamics.

Common Structures

There are two common methods used for acquiring a company in the Maldives – asset acquisition or share acquisition.

Asset acquisition

An asset acquisition involves the sale and transfer of a specific asset or property distinct from the other assets or interests of the business. In such a transaction, the identified asset is segregated from the business entity and conveyed to the purchaser. The company itself, including its shares, ownership structure, other properties, and contractual obligations, remains unchanged.

Such transactions involve administrative complexities, including obtaining approvals for transferring regulated assets such as leases or licences. This structure is commonly used in the Maldives’ tourism sector for acquiring resorts or land/lagoon leases.

Share acquisition

A share acquisition transaction involves the transfer of shares or equity interests in the company from the seller to the buyer. The underlying company, including its assets, contracts, business operations, supplier relationships and other engagements, remains intact and unaffected by the transaction. The sale does not disrupt the company’s operations or its legal standing; the changes occur solely at ownership level. Share acquisitions are straightforward and efficient, particularly for private companies governed by the Companies Act (Law No 7/2023). For public companies, share purchases are subject to additional regulations, including disclosure requirements and potential capital market restrictions.

Share acquisitions in public companies must comply with CMDA rules, which aim to promote transparency and protect shareholder interests. Additionally, acquiring control in a listed company may involve adhering to the Maldives’ listing rules and obtaining approvals from the MSE.

Key Considerations for Foreign Investors

Regulatory compliance

Adherence to the FI Act (Law No 11/2024) and the FDI Policy, which stipulates permissible sectors, shareholding limits, and minimum investment thresholds, is critical. For example, franchising in international airports and approved locations (including products and services) requires compliance with foreign ownership caps of 75%.

Approval processes

Transactions involving foreign investors often require government approval, particularly for sectors with restrictions or of strategic importance. The Ministry of Economic Development typically oversees these approvals.

Sector-specific rules

Tourism and other regulated sectors have unique requirements for ownership and operational control. For instance, foreign ownership of land is prohibited, but long-term leases are permissible.

Tax implications

Understanding the tax regime and legal obligations is crucial to ensure compliance and maximise efficiency. Taxes such as Income Tax, Goods and Services Tax (GST) and Withholding Tax will apply.

While transaction structures can be broadly categorised as full acquisitions or minority investments, the sector-specific regulatory landscape ultimately dictates the permissible structure and the approval requirements for the transaction.

Competition Law

Under the Competition Act (Law No 11/2020), transactions that may affect market competition could face scrutiny under general regulatory oversight. In particular, the Ministry of Economic Development (MED) may intervene if a transaction is perceived to create monopolistic conditions or hinder fair competition – see 6.1 Applicable Regulator and Process Overview and 6.2 Criteria for Review.

Corporate governance in the Maldives is determined by type of entity. Companies are regulated under the Companies Act 2023, which outlines incorporation, management, and reporting requirements. Partnerships are governed by the Partnership Act (Law No 13/2011), which provides flexibility in shared management and liability structures.

Vehicles Allowed for Foreign Investments

Under the FI Act (Law No 11/2024), the following parties are eligible for FDIs:

• foreign individuals;
• foreign companies, with full or mixed shareholder composition (local and foreign);
• companies with a local shareholder composition but registered in foreign jurisdictions;
• branch offices (re-registration of foreign companies);
• partnerships with no local shares;
• joint ventures with local parties; and
• foreign NGOs and legal entities registered abroad.

The most commonly used vehicles for FDIs are private limited companies and partnerships. Private limited companies are preferred due to limited liability protection and their straightforward incorporation process, requiring a minimum of one shareholder and allowing up to 50. Partnerships, including general and limited liability partnerships, are popular among professional service providers.

Implications for Foreign Investments

The choice of corporate or legal entity form has significant implications, such as:

• compliance requirements – public limited companies and branches of foreign companies face stricter reporting and governance obligations compared to private limited companies;
• liability and risk – private limited companies limit the liability of shareholders to their shareholding, providing a secure structure for foreign investors. Partnerships, while flexible, may entail shared liability, depending on the agreement; and
• ease of establishment – private limited companies and partnerships are relatively easier to set up compared to public limited companies or re-registered foreign companies.

The Companies Act 2023 and the Corporate Governance Code govern the relationship between a company and its shareholders, including minority investors. The Act provides mechanisms to protect minority shareholders’ interests, ensuring they are treated fairly and equitably.

Minority Investor Rights in Public Companies

In public companies, minority shareholders are afforded protections under the Capital Market Development Authority’s Corporate Governance Code (CGC), which emphasises principles of fairness and transparency. The CGC ensures that all shareholders, including minorities, have access to relevant information and are treated equitably.

Key protections include the following.

• Participation and voting rights – shareholders are granted the opportunity to participate effectively and vote in general shareholder meetings. The CGC encourages companies to facilitate shareholder participation and the exercise of voting rights.
• Disclosure and transparency – the CGC also requires timely and accurate disclosure of all material matters, including financial performance, ownership, and governance. This transparency enables minority shareholders to make informed decisions.
• Protection from abusive actions – the CGC also seeks to protect shareholders from actions by or in the interests of controlling shareholders that may be detrimental to minority shareholders. This includes ensuring that transactions are conducted fairly and at arm’s length, minimising the risk of exploitation.

Minority Investor Rights in Private Companies

In private companies, minority shareholders have specific rights, including:

• access to information – the right to access company records and financial statements;
• participation in decision-making – the right to attend and vote in general meetings;
• protection against unfair prejudice – the Companies Act provides mechanisms to address actions by majority shareholders that harm minority interests; this includes recourse through legal remedies for any oppressive or prejudicial conduct; and 
• derivative action – the new Companies Act also introduces provisions for derivative action, allowing shareholders to initiate legal action on behalf of the company if directors fail in their duties or breaches their fiduciary duties or act against the company’s best interests.

Initial Disclosures

Foreign investors applying for an FDI licence must submit specific information to the MED during the application process. These disclosures help assess the viability and compliance of the proposed investment:

• personal or corporate identification documents, based on the type of applicant;
• evidence of financial capability, which is usually established by means of a letter of good standing from the banker of the applicants (each foreign shareholder);
• business plans or investment proposal outlining the scope of the investment and expected economic benefits; and
• ownership structure details, including the percentage of foreign ownership and any joint venture agreements with local entities.

Reporting Obligations and Disclosure on FDI Disposal

Foreign investors holding an FDI licence must comply with ongoing reporting obligations to maintain their licence and legal standing. The FDI licence is tied to the approved business structure and activities. Any changes, such as modifications in ownership, scope, or capital structure and disposal, must be reported to the MED and will require prior approval.

There is no specific ownership percentage threshold that alters disclosure and reporting obligations. All foreign investments are subject to the same reporting requirements regardless of ownership stake.

Disclosure Obligations for Companies

Foreign investments registered under the Companies Act 2023 must comply with the disclosure and reporting obligations under it. These include the following.

• Corporate disclosures – foreign investment companies at all times are required to maintain and disclose up-to-date details of their shareholders, directors, and appointed local agent (where applicable).
• Annual reporting – companies are required to submit their annual financial statements and directors’ reports to the Registrar of Companies. Sector-specific regulations may necessitate additional disclosures.
• Material change reporting – companies must notify the Registrar of Companies of any significant changes, such as amendments to the Company’s name, corporate form, addresses, contact details, shareholding, board of directors, capital structure or significant beneficial owners, within 30 days of such changes.

The Maldives Securities Act (Law No 2/2006) (as amended) (“The Securities Act”) provides for matters relating to regulating the Maldives stock market. The Securities Act established the Capital Market Development Authority mandated to regulate and supervise the securities market and to protect and promote the interests of investors in securities.

The available forms of securities are debentures, bills, government bonds, stocks, shares, bonds or notes issued or proposed to be issued or any right warrant or option in respect thereof by a body corporate or any other institution.

It is possible for all companies registered in the Maldives to raise capital for their businesses through equity financing or debt financing.

Under the rules established by Maldives Stock Exchange, to raise capital through equity financing, all businesses are eligible to list their securities subject to meeting the requirements set by the laws and regulations. Equity securities can be listed through an offer for subscription, offer for sale or introductory listing. Debt securities can be listed as an offer for subscription or offer for sale. Additionally, sukuk bonds and investment funds are available for listing.

There are no restrictions for businesses operating in the Maldives to raise capital through debt financing by obtaining loans from both local and international banks.

Businesses primarily fund themselves by debt financing through bank loans versus raising funds through the capital markets, since access to the latter involves stringent regulatory procedures.

There are regulations formulated under the Securities Act that govern various forms of securities in the Maldives, as follows.

• The Regulation on Issuance of Securities (Regulation No 2021/R-126) governs securities issuance, and provides for details regarding prospectuses, disclosure requirements, the offering of securities to the public, and specific investor requirements that need to be met to issue shares, debentures or bonds.
• The Regulation on Registration and Management of Investment Funds (Regulation No 2015/R-57) provides for matters relating to governing, formation, registration and the operation of Investment funds in the Maldives.
• The separate Regulation on the Issuance of Sukuk (Regulation No 2013/R-53) covers the standards and guidelines relating to issuance of sukuk bonds.
• The Maldives Stock Exchange (MSE) facilitates buying, selling and otherwise dealing in securities on the stock exchange. The listing rules of the MSE cover the requirements and procedures for an issuer seeking admission to the stock exchange. To list on the stock exchange, an issuer must be duly incorporated in the Maldives, or otherwise established under the laws of the location where it is incorporated, and must conform to its laws and constitutional documents. It is possible for foreign companies to list on the Secondary Market. Other key requirements that must be met to list on the stock exchange include satisfying capital requirements, shareholding, profit, revenue tests and market capitalisation levels. The specific requirements vary based on the securities that will be listed.

A foreign investor undertaking a foreign direct investment in the Maldives is not subject to securities laws simply by conducting business there unless the investor is seeking to be listed on the stock exchange or to invest in securities.

The recent Third Amendment to the Securities Act (“Third Amendment”) permits foreigners to invest in securities. However, the details of the securities available for foreign investment are to be stipulated in the regulations to be formulated under the Securities Act.

It is a requirement under the Third Amendment that, in determining the securities in which foreigners can invest, consideration must be given to restricted business areas under the FI Act. Therefore, the rules pertaining to how a foreign investment fund can operate in the Maldives will be better known once the regulation concerning this matter has been formulated, by June 2025.

A foreign investment fund operating in the Maldives will be subject to the Securities Act and the Regulations. The Capital Market Development Authority is responsible for formulating the regulations.

A merger control framework was introduced in the Maldives under the Competition Act (Law No 11/2020), which came into effect on 31 August 2021. However, the legal framework for merger control remains incomplete. While the Competition Act defines “merger” as the combination of two or more previously independent entities or the acquisition of control over assets and goodwill through joint ventures, the Ministry of Economic Development and Trade is yet to publish the criteria for determining what constitutes an anti-competitive merger.

As of now, the Competition Act does not require mandatory notification or provide an option for voluntary notification of mergers. This gap may be addressed once the necessary regulations are enacted. In the absence of these regulations, mergers are still subject to competition review if they contravene the Competition Act’s provisions.

Under the Competition Act, a merger control legal framework exists, although the lack of stated criteria for evaluating potential mergers raises questions over substantive overlap or competitive assessment. The Competition Act basically prohibits mergers that restrict, distort, or impede market competition. Once the regulations are in place, factors such as revenue thresholds, market share or anti-competitive practices would probably be included in the merger evaluations.

The Competition Act also provides broad authority to address anti-competitive behaviour, including price fixing, market divisions, production limitations, and abuse of dominance. These principles suggest that any substantive competitive assessment will focus on market dominance, consumer impact, and the promotion of fair competition.

If a merger violates the Competition Act, the MED has the authority to:

• order amendments to the merger agreement to address anti-competitive concerns;
• impose fines ranging from MVR10,000 to MVR100,000 (approximately USD649 to USD6,485.00); and
• direct the Registrar of Companies to deny services to the involved parties that would facilitate the merger.

Given the incomplete regulatory framework, it is unclear what other commitments or remedies may be required.

The MED has the authority to block or challenge mergers that contravene the Competition Act. This includes taking action before or after the investment is made. If the MED determines that a merger hinders competitive practices, it may:

• issue an order to amend the merger agreement;
• impose monetary fines on the parties; and
• instruct the Registrar of Companies to deny facilitative services.

Failure to comply with the Competition Act could result in enforcement actions, including fines and operational restrictions. Foreign investors have the right to appeal decisions under the Competition Act, although the specific appeals process has not been detailed.

Legal Framework

Foreign investments in the Maldives are governed by the FI Act which came into effect on 3 December 2024, replacing the Law on Foreign Investments enacted in 1979. The new FI Act lays out the framework for FDIs, including areas of investment, approvals, investor protections and revocation of licences.

In addition to the FI Act, foreign investments are subject to the following regulatory laws:

• the Companies Act, which regulates the incorporation and operation of foreign businesses;
• the Special Economic Zones Act, which addresses incentives available for investments in certain designated zones;
• the Income Tax Act and Tax Administration Act, which set out tax obligations, such as Business Profit Tax and Goods and Service Tax; and
• sector-specific laws, which are other sectoral laws and regulations applicable to specific industries, such as the Tourism Act and the Fisheries Act, etc.

Foreign investments are governed by the Ministry of Economic Development (“the Ministry”), as the responsible authority for processing applications for such investments, granting necessary approvals, issuing licences and overseeing compliance. The Ministry further consults with other government bodies for sector-specific approvals and regulations.

Scope of Review

The FI Act requires all foreign investments go through the review process regardless of the nature or type of investment. A licence to invest is mandatory for any foreign investment in the Maldives.

Stages of Approval

There are certain stages of obtaining approval for a foreign investment under the FI Act.

1. Foreign investment application – a foreign investment application must be filed with the Ministry with all necessary documentation.
2. Issuance of no objection – upon review of the application, the Ministry will issue a letter of no objection to the eligible applicants, with details of the procedure to be followed. Once the letter is issued, the applicant will be required to complete the procedures mandated by the Ministry.
3. Issuance of a foreign investment licence – the applicants who fulfil the requirements and procedures will be issued a foreign investment licence by the Ministry.
4. Signature of the foreign investment agreement – upon completion of all formalities above, a foreign investment agreement will be signed between the Ministry and the foreign investor.

The duration of notification and review are subject to the type of investment, legal framework and any complexities involved. While there is no minimum or maximum time frame for the review and notifications set in the FI Act, these may be established in the guidelines to be made under the Act.

The review and consideration criteria established under the FDI Act are applicable to all foreign investments. No specific review processes are mandated under the FI Act for specific entities.

Eligibility

Under the FI Act, the following parties are eligible to invest in the Maldives:

1. non-Maldivian individuals.
2. The following foreign entities:
• companies with 100% foreign shareholders;
• companies with both Maldivian and foreign shareholders; and
• companies incorporated outside the Maldives in which Maldivians have 100% direct or indirect shareholdings;
3. The following businesses incorporated in Maldives:
• partnerships and companies consisting of shares held by foreigners; and
• companies re-registered in Maldives under the Companies Act.
4. Joint venture arrangements between Maldivians and foreigners.
5. Foreign NGOs.
6. Legal entities incorporated outside of Maldives in accordance with the laws of the relevant country.

Sectors of Investment

The FI Act requires the business sector of foreign investment to be generally open and conditionally open for foreign investments. Categories applicable to the investments are outlined as provided below.

• Category A – sectors open for foreign investment.
• Category B – sectors open for foreign investment subject to restrictions and conditions.
• Category C – closed sectors.

The Ministry is mandated to publish a list of Category B sectors with details of any conditions and restrictions applicable. Until the list is published under the FI Act, the sectoral requirements are subject to the FDI Policy.

Minimum Investment Requirements

Investors must meet initial investment requirements depending on the business activity 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 Requirements

The maximum percentage of foreign shareholdings 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. The 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 the activities may be negotiated.

Considerations in Granting Approvals for Investment

The approval process for foreign investments is subject to the following considerations:

1. financial capacity;
2. permission for residence and entry into the Maldives;
3. fulfilment of any conditions set under the regulations for restricted investments and investments subject to further conditions;
4. the extent to which the proposed investment is likely to pose a threat to national security;
5. the impact of the proposed investment on business in the relevant sector;
6. possible job opportunities and the development of human resources through the proposed investment;
7. opportunities for the export of local products, goods and services as a result of the investment;
8. environmental effects; and
9. the potential for the introduction and development of technology to the country as a result of the investment. 

Under the FI Act, the review process for foreign investment proposals includes an evaluation of the extent of threat the investment is likely to pose on the national security of the country. As sectors of investment are categorised with negotiable and restricted sectors identified, the review process for investment proposals will include sector-specific considerations in terms of national security.

Within the approval process, the Ministry has the discretion to request for any information that is needed with regard to assessing the proposals and their potential threats to the national security. The investments are further subject to sector-specific laws and regulations, and any requirements and conditions set for national security will be imposed on the investment.

Pre-Investment Approval

The review process for investment proposals involves several considerations, as listed above. The Ministry may not issue approval to proposals that do not meet the criteria or are not eligible for investing in the country. It may also block or reject a proposal which is unfavourable to the country after evaluating mandatory considerations after assessment of the proposal.

Post-Investment Challenges

The Ministry may review and challenge investments after approval where new concerns arise, such as breach of terms of the investment agreement, non-compliance with the applicable law, or emerging risks to national security.

Revocation and Cancellation of Investment Licences

The Ministry has the discretion to cancel or withhold an investment licence in the following circumstances:

1. declaration of bankruptcy of the investor;
2. change of the business to a locally owned company;
3. failure to operate the approved activity for a minimum period of one year, or the exercise of unapproved activities;
4. cancellation of an operational licence or permission granted by a competent authority to carry out a business activity; and
5. dissolution of a re-registered foreign company which was issued with an investment licence.

A foreign investment licence may be revoked in the following instances:

1. submission of incorrect information to obtain the licence;
2. failure of the investor to fulfil a condition set in the licence.

Where an investment licence is intended to be revoked or suspended, the investor must be informed of the revocation/suspension through written notice with the relevant justification. The investor must be granted the opportunity to present an argument against suspension or revocation of the investment licence. Where the investor makes a submission in response to the notice, the Ministry must make a decision on the submission. If the investor makes no submission in response to the notice, the Ministry must inform the investor on the suspension or revocation of the licence in writing.

Additional circumstances concerning the withholding or cancellation of licences are to be provided in the regulations to be made under the FI Act.

Appeal of Decisions

Under the FI Act, investors have the right to challenge the decisions taken by the Ministry or any other government institution regarding foreign investment. The Ministry is mandated with establishing a review committee to look at matters filed regarding investments. Where the matter filed involves a decision by a member of the committee, that particular member will not be included in the committee set up for that discussion.

Where the decision by the Ministry on a complaint by an investor is not resolved, the investor has the right to file the matter with the relevant court or follow the procedure prescribed in the investment agreement.

Foreign Currency Act

The Foreign Currency Act (Law No 32/2024) stipulates that all transactions in the Maldives must be conducted in MVR. However, exceptions include international transactions, payments for exported goods and services, and payments to government or state institutions under specific acts or regulations. Exemptions for businesses earning foreign currency income include payments for goods and services, dividend payments, transactions with shareholders or related parties, employee salaries and benefits, share transfers, and dealings related to the issuance of bonds and sukuk.

Industry/Sector-Specific Restrictions

Tourism Sector

The tourism industry is governed by the Tourism Act (Law No 2/99) and the regulations enacted under the Tourism Act. Investors must obtain licences and approvals from the Ministry of Tourism for resort development, guesthouses, or other tourism-related projects.

Fisheries Sector

Investments in the fisheries sector are subject to the Fisheries Act (Law No 14/2019). Certain activities, such as the exploitation of specific marine resources, may have restrictions to protect the environment and local industry.

Banking and Finance Sector

The Maldives Monetary Authority Act (Law No 6/81) regulates financial institutions. Foreign investors must obtain licences to operate banks or non-banking financial institutions.

Telecommunications Sector

Investments in telecommunications are governed by the Telecommunications Act (Law No 43/2015). Approvals from the Communication Authority of Maldives (CAM) are required.

Healthcare Sector

Investments in healthcare are regulated under the Health Services Act (Law No 29/2015). Approvals are needed from the Ministry of Health for hospital or clinic operations.

Money Laundering and Financing of Terrorism Act

Financial transactions are subject to the Prevention of Money Laundering and Financing of Terrorism Act (Law No 10/2014) and associated regulations. The Maldives Monetary Authority (MMA) oversees compliance with Money Laundering and Financing of Terrorism Act to prevent illicit financial activities. Businesses must ensure proper documentation and comply with identity verification procedures by reporting entities.

Tax Laws - See 9.1 Taxation of Business Activities

Direct Taxes

Residents are taxed on worldwide income, while non-residents and temporary residents are taxed on income sourced in the Maldives, as follows.

• Corporate income tax – a rate of 15% applicable to taxable income exceeding MVR500,000 is levied on businesses including corporations, partnerships or any other structure, but excludes individuals and banks. It also applies to non-resident companies with a permanent establishment (PE) in the Maldives and they are taxed only on the income attributable to the PE.
• Individual income tax – a progressive rate ranging from 5.5% to 15% on annual income exceeding MVR 720,000 applies to sole proprietors. Businesses are required to withhold taxes on monthly salaries above MVR60,00 using the same progressive rates as individual income tax.
• Non-resident withholding tax – specified payments made by Maldivian business to non-residents are subject to 10% tax. 
• Income tax for banks – banks operating in Maldives face a higher income tax rate of 25%.
• International transportation tax – 2% on gross income is applicable to non-resident operators engaged international transportation with a permanent establishment in the Maldives

Indirect Taxes

• Goods and Services Tax – the Maldives has a dual rate GST system of 8% for general goods and services, while tourism GST is 16%, rising to 17% in July 2025.
• Green tax – tourist establishments in the Maldives are required to collect green tax from tourists at the following rates for each day a tourist stays in the establishment:
• USD12 for each day of stay at tourist resorts, integrated tourist resorts, resort hotels (located on an uninhabited island, or with more than 50 registered rooms), tourist vessels and guesthouses (located on uninhabited islands or with more than 50 rooms).
• USD6 for each day of stay at hotels or guesthouses with less than 50 registered rooms and located on uninhabited islands.
• Airport taxes and fees – a tax imposed on passengers departing from airports in the Maldives, with rates that vary based on the departure airport and the travel class of the passenger.

Businesses are required to withhold 10% tax on dividend and interest payments to non-residents, except for interest paid to approved banks or financial institutions.

Treaty With UAE

No source taxation is applicable on dividends and interest in Maldives. However, these provisions do not apply if the recipient carries out business through PEs in the Maldives, and the dividends or interest are effectively connected with that PE or are fixed-base.

Treaty With Bangladesh

Dividends and interest may be taxed in the Maldives, the source country. The rates of withholding tax under domestic law align with the tax treaty. However, interest is exempt from source taxation if paid to the government of Bangladesh, to the Bangladesh Bank or any other institution agreed between competent authorities.

This treaty with Bangladesh includes a Limitation of Benefits (LOB) article denying treaty benefits if obtaining such benefits is a principal objective, or one of the principal objectives, unless the granting of such benefits is consistent with the purpose of the treaty.

Loss Relief

Trading losses can be carried forward for up to five future periods to be offset against taxable income. This loss relief can only be claimed if shareholders maintain over 50% ownership and the business continues in the same line of activity from the start of the loss-making period to the end of the period when the relief is claimed.

Capital losses derived from disposal of movable, immovable, intellectual or intangible property can be set off against capital gains for a period of not more than five years from the end of the period in which they were incurred.

Special Deductions for Banks

Provision for doubtful debts are not deductible when calculating taxable profit. An exemption to this provision applies for banks, where a deduction is allowed for a specific loan loss provision for doubtful debts in respect of loans and advances, as computed according to the Act.

Related-Party Financial Transactions

Interest on intercompany debt is deductible for tax purposes up to a maximum of 6% per annum subject to the availability of interest capacity, which stands at 30% of profit before loss relief, capital allowance and interest deductions. Effective transfer pricing management is required for these financial transactions.

In addition to the above, tax treaties can be utilised to reduce withholding taxes on payments made to non-residents, as stated in 9.3 Tax Mitigation Strategies.

Tax on Sale or Other Dispositions of FDI

Any gains derived from the disposal of assets are subject to capital gains, provided the assets do not qualify for a capital allowance. There is no general blanket exemption for capital gains earned by foreign investors.

In cases where a foreign non-resident company earns profit on any of the following transactions with a resident company, the latter must withhold 10% of the gross payment:

• profit from the sale of immovable property located in the Maldives;
• profit from the sale of shares or any interest in a company, partnership or trust provided at the time of disposal, at any time during the past 365 days, when more than 50% of the entity is directly or indirectly related to an immovable property in the Maldives;
• profit from the sale of shares or interest of a resident entity in Maldives; or
• income from the disposal of intellectual or intangible property used or registered in the Maldives, or income via an agreement made in the Maldives for the disposal of such property.

Anti-Avoidance Regimes for Foreign Investments

The Maldives has implemented a comprehensive and effective framework to ensure FDIs are conducted transparently, fairly, and with economic substance.

Transfer Pricing Rules

Transfer pricing rules ensure that transactions between foreign investors and related local entities adhere to the arm’s length principle. Compliance with these rules demands meticulous documentation, covering commercial relationships, transaction terms, and proof of arm’s length pricing.

Addressing Offshore Entities and Debt Manipulation

The jurisdiction’s Controlled Foreign Entity (CFE) rules prevent tax deferral by ensuring that the income of offshore entities controlled by residents is taxed proportionately.

To curb tax avoidance through excessive debt financing, thin capitalisation rules limit interest deductions to 30% of tax-EBITDA. This prevents companies from inflating debt to shift profits via interest payments.

Guarding Against Artificial Arrangements

Through General Anti-Avoidance Rules (GAAR), the tax authorities challenge transactions lacking genuine commercial purpose or economic substance. Transactions misaligned with economic reality may be recharacterised or disregarded, addressing mismatched tax systems and low-tax jurisdiction routing to ensure substance in cross-border investments.

Global Collaboration for Transparency

The jurisdiction enhances compliance through international agreements for automatic data exchange. These agreements expose hidden offshore accounts and beneficial ownership structures.

Legal and Regulatory Regime

1. The Constitution of the Republic of Maldives – this guarantees every citizen the right to engage in any employment and all persons the right to form and participate in trade unions.

1. Employment Act & Regulations – 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 (Law No 2/2008) (as amended). The Employment Act states that, except for the parties excluded from the Act by any other statute, it is applicable to both public and private sector workers and employers. The Employment Act is not applicable to the Police, Armed Forces and persons serving in the Foreign Service.
2. The Regulations enacted under the Employment Act – these provide details regarding redundancy, working hours, overtime, service charges, employing expatriates, and matters relating to employment agencies.

2. The Industrial Relations Act (Law No 1/2024) & Regulation on Registration and Governance of Unions – this Act lays out the detailed framework relating to formation of trade unions, employer organisations, participation in unions, and mediation between workers and employers. The regulation provides for policies relating to registration and governance of unions and federations. In addition, it outlines the rules governing the Registrar of Unions’ exercise of powers.
3. The Occupational Safety and Health Act – this provides for matters relating to safeguarding the workplace and workers’ health and safety.
4. The Prevention of Sexual Abuse and Harassment Act – this covers what constitutes sexual abuse and harassment, and the responsibilities of employers in preventing these in the workplace.

Applicability of the Laws

The Employment Act, Industrial Relations Act and Occupational Safety and Health Act specify that, except for the parties excluded from the Act by any other statute, it is applicable to both public and private sector workers and employers. Currently, only the Police and Armed Forces are not included in the Employment Act. The Police, Armed Forces, and Presidential appointees are exempt from the Industrial Relations Act.

The above specified laws and regulations are applicable to both local and foreign employers in the Maldives. There are no additional laws or regulations that foreign investors should consider regarding employment.

Prevalence of Collective Bargaining, Works Council or Labour Union Arrangements

The laws and regulations relating to collective bargaining and labour unions only came into effect in 2024.

Compensating Employees

The general rule in the Maldives is to pay employees in money. Payment in kind is allowed if it meets the conditions stipulated in the Employment Act (generally, it will not be disallowed, must be of a reasonable value and able to be utilised by or be of benefit to the employee and their family).

All Maldivian employees are required to be paid the minimum wage set by the government, with the amount paid based on the employer’s type of business. The government categorises businesses based on gross income, net profit and number of employees. The minimum wage may include a basic salary and a fixed allowance determined by the employer. It is prohibited to include any other payments payable to employees, whether discretionary or statutory, in calculating minimum wage. Currently, expatriate employees in the Maldives do not qualify for the country’s minimum wage, so employers are free so set their own minimum wage for these employees.

All Maldivian employees have to be registered in the Maldives Retirement Pension Scheme by their employers. Employers are required to contribute an amount equivalent to 7% of the pensionable wage of the employee to the scheme every month. It is not mandatory to enrol expatriate workers in the Maldives Retirement Pension Scheme.

Other statutory benefits mandated to be paid to employees are as follows:

• a Ramadan allowance payable before every Ramadan to Maldivian employees (the employer is granted discretion to pay expatriate employees);
• a service charge payable to all employees working in the tourism sector;
• overtime and public holiday pay (how employee compensation is typically addressed or implicated by an acquisition, change-of-control or other investment transaction in the jurisdiction);
• there are no implications for employees’ compensation in the event of an acquisition, change-of-control or other investment transaction, as employee agreements are transferred to the new business owners without any amendments to the terms of the employment if there is a change in business ownership; and
• where the acquisition, change-of-control or other investment transaction results in redundancy, the general rules applicable to redundancy will be applied. The Employment Act mandates a notice period be given to employees, which can be paid in lieu. No additional redundancy payments will be due.

When a business operating in the Maldives, whether acquired in part or full, undergoes a change of control, is assigned, leased or transferred in any other way, the Employment Act mandates that the employment agreements of the business be transferred to the new owner. The rights, obligations and any transactions between the employees and employer will be deemed to have been transferred/taken place between the transferee and the employees. This includes the continuity of employment without interruption.

The Employment Act does not mandate for the workers’ council or other collective bargaining requirements to be met to complete an acquisition or other investment transaction.

The FI Act requires all foreign investments go through an approval process which includes extensive stages leading up to their agreement. Permitted sectors for foreign investments are subject to the FDI Policy until the mandated regulations are published under the FI Act. The approval process of foreign investment applications is generally subject to the following considerations:

1. the financial status of the investor;
2. permissions for entry into and residence in the Maldives; and
3. the fulfilment of any conditions set under the regulations for restricted investments and investments subject to further conditions.

The screening also includes assessments of adequacy of intellectual property protection measures, particularly where the proposed investment involves technology transfer, trademarks, or any proprietary processes. In addition, the proposals will be examined for compliance with the laws and regulations of the Maldives.

While there is a Copyrights Act which protects software and databases, the Maldives lacks comprehensive legislation for protection of other intellectual property rights.

The Maldives is, however, party to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), which sets minimum standards for the protection and enforcement such rights. The TRIPS Agreement covers intellectual property rights relating to various areas, such as copyright, trademarks, geographical indications, designs, patents and trade secrets.

Article 24 of The Constitution of the Republic of Maldives (2008) provides that everyone has the right to respect for their personal and family life, home and private communications, and that every individual must respect these rights. Apart from this, there is no general legislation on privacy and personal data protection to date.

The Maldives has no legislation covering intellectual property rights that could reach foreign investors extra-territorially. Sector-specific laws could cover confidentiality or data security obligations, and indirectly impact foreign operators – depending on the sector of investment. There is currently no regulatory body in the Maldives mandated for data protection.

The FI Act does, however, require compliance with international treaties and conventions relating to investments and businesses to which the country is a party. Where certain policies and obligations are set out differently under these treaties regarding investments in the Maldives, the terms of such conventions (which include bilateral or multilateral investment treaties and independent agreements which set out policies of investment) will take precedence over the FI Act for investments by investors from countries that are party to them.