The Russian Travel Union (RST) has formally requested the Maldivian government to exempt Russian tour operators and travel agencies from recent tax amendments that require foreign businesses selling Maldivian tourism products to pay Tourism Goods and Services Tax (TGST).
The RST, which represents over 3,000 tourism businesses, including hotel chains in Russia—one of the Maldives' top source markets—appealed in a letter addressed to Tourism Minister Mohamed Ameen.
In the letter, the RST expressed concern over the requirement to pay taxes based on the final prices they charge when selling Maldivian products. The union argued that this effectively means paying taxes to the Maldives for business activities conducted within Russia, a move they deem untenable.
"The RST believes that implementing such a system for Russian companies is both legally and practically impossible," the union stated in its letter.
The RST explained that they purchase Maldivian products inclusive of all local taxes and fees. When they package, market, and redistribute these products in Russia, the resulting margin constitutes their own business revenue. These transactions are governed by Russian tax and accounting laws, to which Russian legal entities must adhere.
The union further noted that these businesses are required to submit reports to Russian authorities regarding the total value of tourism products sold through the "Unified Information System of Electronic Vouchers."
The RST highlighted that there is no practical mechanism for a foreign tax control system to oversee internal Russian business transactions as proposed.
"To fully implement such a tax, Maldivian tax authorities would need to obtain and verify contracts, expenses, payment documents, and financial records made by Russian companies for transactions within Russia. There is no practical system to exercise such foreign tax control over Russia's domestic business activities," the RST said.
In light of these issues, the RST requested that Russian businesses be exempted from the "destination principle" of taxation and that the new regulations not apply to contracts and products sold prior to the implementation of these rules. Emphasising the importance of the Russian market to Maldivian tourism, the union urged the government to find a solution before the new policies take full effect.
In addition to Russia, travel unions from Western Europe and India have also expressed concern over the changes to the foreign business taxation policy. In protest, some businesses have ceased selling the Maldives as a destination.
According to the formula set by the Maldives Inland Revenue Authority (MIRA), foreign businesses must pay tax on the difference between their selling price and the price paid to the Maldivian supplier. Since this amount is already considered tax-inclusive, the formula requires businesses to calculate the tax component by dividing the margin by 1.17.
