Under the Foreign Exchange Act, the Maldives Monetary Authority (MMA) has amended regulations to mandate that all businesses required to exchange foreign currency with banks must submit their projected foreign currency expenditures to the Authority before the start of each year.
According to the amendments to the General Regulation on Foreign Exchange, this budgetary submission requirement applies to resorts, guesthouses, and safaris obligated to exchange foreign currency, as well as any business generating more than $25 million in annual foreign currency revenue.
The MMA stated that these budget submissions are required to obtain the Authority’s authorization for expenditures conducted in foreign currency. This provision was included in the recent legislative changes, making it prohibited to conduct such transactions without prior approval from the MMA.
The law now stipulates that authorization must be obtained before conducting specific foreign currency transactions. These include payments for goods and services, staff salaries, transactions with shareholders, and payments mandated by court rulings, arbitrations, or tribunal decisions.
Transactions requiring MMA authorization include
- Payments for goods and services in foreign currency by businesses earning foreign exchange, and the acceptance of such payments by the providers.
- Distribution of dividends to shareholders and other transactions between the business and its shareholders or related parties in foreign currency.
- The sale and purchase of shares in foreign-earning businesses, the issuance of bonds or sukuks, and transactions between the business and its bondholders or sukuk holders.
- Payment of salaries and benefits to employees in foreign currency and the acceptance of such payments by employees.
- Acceptance of foreign currency by duty-free shops for goods and services sold to tourists.
- Foreign currency obligations determined by a court judgment, order, or decisions made under tribunal or arbitration mechanisms.
Under these changes, the MMA has instructed businesses to submit their annual budgeted amounts for foreign currency expenditures on goods and services at least 30 days before the start of the year. Should an essential expenditure arise during the year that falls outside the submitted budget, additional authorization must be sought from the MMA.
In addition to submitting projections for next year, businesses are required to submit their planned foreign currency expenditures for the remainder of the current year to the MMA within the next 14 days.
The MMA reserves the power to withhold authorization for these expenditures. In such instances, the Authority must provide a written explanation detailing the reasons for the refusal.
Furthermore, businesses must submit reports on foreign currency obligations and transactions proposed and settled during the first six months of the year by July 28 annually. Information for the second half of the year must be submitted by January 28 of the following year.
Despite the requirement to seek authorization for expenditures, the MMA clarified in the regulations that there are no restrictions on accepting foreign currency as payment for goods or services.
