Parliament has approved a major amendment to the Goods and Services Tax (GST) Act that will require foreign tour operators, offshore booking platforms, and overseas travel agents to pay GST on tourism services provided in the Maldives.

The government estimates that the changes could generate an additional USD 103.8 million in annual state revenue by closing existing gaps in the tax system.

The bill, submitted on behalf of the government by Kulhudhuffushi North MP Mohamed Dawood, was passed with 54 votes in favor and two against.

The legislation was reviewed by the Whole House Committee and incorporated amendments proposed by Thulusdhoo MP Ibrahim Naseem.

A key feature of the amendment is the introduction of the destination principle, under which goods and services are taxed in the jurisdiction where they are consumed.

As a result, inbound tourism services including accommodation, food and beverage services, and domestic transportation will be subject to GST even when the provider does not have a permanent physical presence in the Maldives.

The revised law also establishes that a service is considered to have been supplied in the Maldives when the relevant work is physically carried out in the country or when it is directly connected to immovable property located in the Maldives.

The government said the changes address longstanding difficulties in applying the existing GST framework to non-resident businesses operating within the tourism sector.

By bringing overseas companies benefiting from Maldives tourism under the tax system, the amendment is intended to strengthen government revenue while creating a more level playing field between foreign and locally established tourism service providers.