The President's Office yesterday (February 23) gazetted a new import duty exemption rule that gives the President the power to exempt duties on goods for investments worth more than MVR 1.5 billion for a period of 15 years.

The decade-old former regulation was repealed with the new regulation, with major changes, published yesterday. Under the previous regulation, the President was given the power to exempt duties only on goods imported for the commencement, conduct and operation of economically useful activities.

The new rule also empowers the President to exempt duties on imports, exports or re-exports in special circumstances, such as the outbreak of disease or natural disaster and in the course of an economically useful strategic project or business.

There were 12 economically useful activities listed under the new regulation. The previous regulation listed only eight activities.

Economically useful activities

1. Materials used for building and repairing boats
2. Agricultural goods for small and medium-sized enterprises
3. Trade and similar economic activities that are expected to reduce imports and increase exports
4. Goods imported by fishermen to use in fishing and fisheries development for the purpose of earning income
5. Business and economic activities that diversify the economy, increase business and employment opportunities, and facilitate the daily lives of the people
6. Businesses that boost foreign exchange
7. Economic activities not commonly conducted in the Maldives and activities for economic diversification
8. Expansion of small and medium enterprises and economic activities facilitating them and activities under a government project or loan or grant
9. Brand new start-ups in the tourism industry, capital expenditure and repairs of existing investments that cost more than 25 percent of the original value of the investment
10. Oil imported and re-exported by licensed local businesses for marine fuel bunkering purposes and used as bunker fuel for foreign vessels
11. Resort development in Haa Alif, Haa Dhaal, Shaviyani, Thaa, Laamu and Addu atolls in order to expand tourism
12. Goods brought by an investor in halal tourism

Capital equipment, spare parts, materials and other supplies are exempt from duty and revenue fees under these 12 categories.

In the case of a new economic activity, duty, royalty and revenue fees are waived until the investment is established.

Long-term duty exemption is given to existing investments based on value if they expand core economic activities and increase foreign exchange. All businesses in the tourism industry fall within this definition.

Duty relief period based on investment value

• $2 million to $25 million - for three years
• $25 million to $50 million - for five years
• $50 million to $75 million - for seven years
• $75 million to $100 million - for 10 years
• Over $100 million - for 15 years

While the new rule included almost all economic activities in the Maldives, such concessions affect revenue.

According to the Tax Expenditure Report 2024 released by the Finance Ministry, the revenue loss due to duty concessions in 2023 amounts to MVR 1.6 billion.