Published on and written by Cyril Jarnias
The Maldives is one of those jurisdictions where taxation has become a true tool for attracting capital, particularly in tourism real estate and large integrated projects. Between the absence of taxes on certain income categories, favorable regimes for special economic zones, and custom-tailored schemes for foreign investors, the archipelago has built an image as a “pro-investor” hub. But behind this marketing pitch lies a precise tax framework, with nuances that must be mastered before committing.
Real estate investors can benefit from several tax advantages in the Maldives. These advantages are defined by recent legislation, special regimes, and the practices of the Maldivian tax administration. It is essential to refer to these frameworks to understand the applicable benefits.
A Framework Tailored to Attract Real Estate Investment
Maldivian policy is based on a simple idea: compensate for the country’s structural constraints (isolated archipelago, dependence on tourism, climate vulnerability) with a tax and regulatory environment that is particularly favorable to investors, especially foreign ones.
The core of this framework, for real estate, is found in the Income Tax Act (Law No. 25/2019), the law on special economic zones (Special Economic Zone Act), discretionary exemption regimes decided by the President, and a series of measures specific to tourism and construction.
The authorities have established a clear organization: the Ministry of Finance develops revenue policy, MIRA administers domestic tax and GST, and the Ministry of Economic Development and Trade, via ‘Invest Maldives’, serves as a one-stop shop for investment projects.
A Tax System Designed to Offset the Cost of Entry
Maldivian real estate, especially high-end property, is expensive to develop: infrastructure to build on sometimes virgin islands, massive importation of materials, energy dependence, logistical constraints. To compensate for these extra costs, the state has officially chosen to use targeted exemptions (customs duties, profit tax, GST, withholding taxes), rather than direct subsidies, aiming to steer capital towards certain sectors deemed strategic such as resorts, “sustainable townships,” or projects in special economic zones.
Ownership Regime: The Logic of the Long-Term Lease
A key element in understanding real estate taxation in the Maldives is that foreigners cannot own land outright. They access real estate through long-term leases, typically from 50 to 99 years, often as part of tourism projects or integrated residential programs.
These leases, often structured as strata-title properties (villa, apartment, resort unit), are transferable (assignment, inheritance, security) subject to approval by the authorities. From a tax perspective, they are treated as real property rights and considered real estate assets for income tax and capital gains tax purposes.
Zones Specifically Dedicated to Luxury Real Estate
For investors targeting high-end residences, the government has designated several dedicated zones, particularly near Malé, in the Kaafu atoll, such as Gaafaru, Fushidhiggaru, or Ras Mala. These sites are at the heart of the upscale strategy and are often eligible for enhanced incentive regimes (via SEZs or “sustainable townships”), which translates directly into tax advantages during both the construction and operational phases.
Real Estate Tax Reform: From Tax on Price to Capital Gains Tax
Until January 1, 2020, transfers of buildings and land were subject to a 15% tax on the total selling price – a heavy and non-nuanced “land sales tax” system. The entry into force of the Income Tax Act completely overhauled this regime: the tax proportional to the price was repealed, replaced by taxation based on net gain, as part of a capital gains tax (CGT) integrated into income tax.
A Major Shift in Favor of Long-Term Projects
This change was decisive for real estate attractiveness:
Tax no longer applies to the gross selling price, but only to the capital gain (difference between the disposal price and the cost base). This reform benefits long-term investors, who are taxed only on their actual economic gain, and aligns the tax treatment with international standards, thereby facilitating cross-border transactions and the integration of taxes into financial models.
How is Taxable Capital Gain Calculated?
The “cost base” of a property includes all expenses directly related to acquisition, improvement, and disposal:
| Cost Base Component | Tax Description |
|---|---|
| Acquisition price | Sums paid to obtain the lease/real property right |
| Intermediary fees | Agent commissions, marketing fees |
| Legal fees | Lawyer fees, contract drafting fees, registration |
| Work and improvements | Renovation, expansion, modernization costs of the property |
| Title acquisition cost | Amounts paid to the State for the title, rights related to land security |
| Direct disposal fees | Fees, administrative costs, or commissions paid to conclude the sale |
For properties acquired before January 1, 2020, the legislature has provided a favorable transition rule: the acquisition value taken is the market value as of January 1, 2020. In other words, any appreciation that occurred before that date is effectively exempt from capital gains tax. This is a significant advantage for historical investors who acquired leases or units many years earlier.
Tax Treatment for the Seller: Individual vs. Company
Real estate capital gains are not taxed at a separate rate: they are integrated into the taxpayer’s taxable income.
The top income tax rate for an individual applies to gains exceeding 2.4 million MVR annually.
This means an investor who structures their projects through a company can optimize the tax burden by playing with the structuring and timing of income distribution, particularly by combining losses and capital gains.
Key Exemptions: Primary Residences, Inheritances, Social Housing
To complement this capital gains regime, the legislature has provided several targeted exemptions, which can directly concern investors or their end clients.
Sale of Primary Residence
The disposal of an individual’s primary residence is explicitly exempt from Capital Gains Tax. In the Maldivian context, this exemption mainly applies to local residents, but can also concern some long-term resident foreigners, provided they meet the criteria for tax residency and “principal private residence”.
Properties Received by Inheritance
Real estate properties transferred by inheritance are not subject to tax at the time of transfer. It is only when the heir later sells the property that any potential capital gain becomes taxable. Again, the exemption is targeted at the succession event, limiting tax friction on family transfers.
Social Housing and Socially-Oriented Projects
Regarding GST, the legislature has stipulated that the sale of housing (flats, land, buildings) by the government or by a third party as part of an approved social housing program is exempt from GST. This is a key element for investors participating in such programs: the final selling price for the buyer is not burdened with GST, which improves the product’s competitiveness.
Under these programs, developers cannot deduct the GST paid on their expenses. In practice, reimbursement arrangements are often established, where the state compensates for the GST burden borne by the builder.
Local VAT (GST): Impact on Sales, Rentals, and Tourism
The Goods and Services Tax functions as a two-tier VAT: a general rate for the “classic” economy, and a specific rate for tourism activities, at the heart of the Maldivian model.
Two Main Rates, Two Sectors
| Sector Concerned | Applicable GST Rate | Payment Currency |
|---|---|---|
| General sector (non-tourism) | 8% | Maldivian Rufiyaa (MVR) |
| Tourism sector | 17% (TGST, from the date stipulated by law) | US Dollar (USD) |
For real estate, this means: an in-depth analysis of the market, purchase trends, supply and demand, as well as prices that influence investment decisions.
– That a standard residential project or commercial building outside the tourist circuit falls under the general 8% rate in principle.
– That a resort, an integrated tourist resort, a hotel, or a residence included in a tourist structure (where accommodation services are sold to visitors) falls under the specific 17% rate.
Real Estate Rental: When Rent Becomes a Taxable “Supply”
Maldivian law considers the receipt of rent on a building as a supply of goods or services, therefore in principle subject to GST if the landlord is registered for GST. Included in the notion of “rent” are:
Taxable rental income includes several specific categories: standard periodic rents, security deposits used or absorbed by the landlord, advance rents consumable by the owner, payments for fixtures attached to the property, insurance indemnities received for non-payment of rent, and penalties for lease termination. These elements all constitute rental income subject to taxation.
An investor who rents out villas, apartments, or commercial spaces must therefore factor GST into their cash-flow forecasts, depending on their status (tourism or non-tourism) and their activity volume (the registration threshold is set at 1 million MVR of taxable supplies over 12 months for the general sector).
Deadlines, Invoicing, and Penalties
The Maldivian regime imposes on persons registered for GST:
The issuer of a tax invoice must comply with three main obligations: issue the invoice within three days of delivery, declare and pay GST no later than the 28th of the month following the taxable period, and maintain separate accounting records kept for at least five years.
Delays in filing, payment, or registration result in penalties, which in practice incentivizes investors to entrust accounting management to local teams familiar with the MIRAconnect portal.
Transfer Taxes, Withholding Taxes, and Other Levies
Beyond income tax and GST, the real estate investor must navigate a mosaic of specific taxes that affect property-related flows.
Property Transfer Tax: 10% on Transfers, 4% in Certain SEZs
A Property Transfer Tax of 10% applies to transfers of real property, in principle borne by the purchaser. This levy is in addition to GST and any registration fees, and must be included in the total acquisition cost.
In Special Economic Zones (SEZs), sales of long-term rights on villas or rooms in ‘strata’ format within resorts are subject to a Property Transfer Tax of 4% on the total value. This one-time tax is usually offset by more substantial exemptions on other applicable taxes for these projects.
Withholding Tax on Rents and Capital Gains of Non-Residents
Payments made to non-residents are subject to a withholding tax regime structured around a rate of 10%. Specifically concerned are:
– Rents paid for real estate located in the Maldives.
– Capital gains realized by a non-resident upon the sale of Maldivian real estate (or shares whose value is primarily derived from buildings located in the country).
– Royalties, interest, dividends, commissions, or technical fees paid by a Maldivian entity to a foreign provider.
Upon the sale of a property in Mauritius, the buyer is required to withhold 10% of the gross selling price and pay it to MIRA (Capital Gains Withholding Tax). For the seller, this withholding is a credit installment against the final tax on the capital gain, calculated in their annual income tax return. If the amount withheld exceeds the final tax due, the seller can apply for a refund of the overpayment.
This system secures the interests of the Maldivian tax authority vis-à-vis non-residents, while leaving room for recovery through tax treaties (when they exist) and the tax credit mechanism in the seller’s state of residence.
Disappearance of Stamp Duties
The repeal of the Stamp Duty Act in July 2021 eliminated stamp duties on transactions, including real estate ones. For the investor, this is one less friction cost in structuring acquisitions (contracts, mortgages, long-term leases).
Rental Income: Deduction Rules and Withholdings
Rental income from real estate is fully taxable under the income tax framework. However, the legislature has provided a simplified mechanism for deducting expenses for certain landlords.
20% Flat-Rate Deduction for Cash Basis Landlords
Companies that derive income primarily from rentals and maintain their accounts on a cash basis may opt for a flat-rate deduction of 20% of their gross rent for expenses, instead of deducting actual costs. This scheme offers a double advantage:
This management mode simplifies administration by avoiding complex arbitrage on the nature of expenses. It can also be tax advantageous, particularly when actual expenses are less than 20% of rents, which is typical for lightly managed, low-debt properties.
For an individual investor or a light structure operating a few villas or apartments, this option can represent a concrete tax advantage.
Withholding on Rents Paid to Non-Residents
When a non-resident landlord receives rent from a property located in the Maldives, the tenant or managing agent must apply a 10% withholding on gross payments, to be remitted to MIRA. Again, the final tax burden will depend on the landlord’s situation in their country of residence and the existence or not of a tax treaty with the Maldives.
Special Economic Zones: The Most Powerful Tax Lever
The Special Economic Zone Act (Law No. 24/2014) is arguably the most impactful tax tool for large real estate and tourism projects. It creates legal spaces where developers and investors benefit, for a limited time, from a radically lightened tax regime.
Types of Zones and Targeted Sectors
The law identifies several types of zones: industrial parks, export processing zones, free ports, enterprise zones, technology parks, offshore financial centers, etc. To this classic list is now added a category directly linked to real estate: “sustainable townships”.
Minimum investment threshold in millions of dollars for a project to be recognized as a special economic zone.
– Energy self-sufficiency (at least 60% renewable energy).
– Sustainable waste management.
– Local food production to enhance food security.
Tax Advantages Offered in SEZs
Investors and developers recognized in an SEZ can benefit from an incentive package, usually guaranteed for the first ten years of operation:
| Type of Advantage | Content for Developers / Investors in SEZs |
|---|---|
| Exemption from import duties | On capital goods, construction materials, and equipment related to the project |
| Exemption from income tax / BPT | Waiver of Income Tax / Business Profit Tax for a period of up to 10 years |
| Exemption from GST | On certain transactions related to the development and operation of the zone |
| Exemption from Withholding Tax | On certain cross-border payments related to the project (dividends, interest, services) |
| Exemption from taxes on land sales/purchases | On land transactions within the zone |
| Free repatriation of capital | No restrictions on repatriation of capital and profits |
For a real estate investor, these exemptions radically change the game: construction flows are relieved of import taxes and GST, profits generated from sales of villas or rooms can be exempt, and distributions abroad are not subject to withholding.
Special Case of “Sustainable Townships”
A recent amendment to the SEZ Act further introduces a preferential tax rate regime for developers of “sustainable townships”:
An advantageous tax regime applies for 20 years: a 5% income tax rate is applied for the first ten years, followed by a 10% rate for the next ten years. Beyond this 20-year period, the standard regime under the Income Tax Act applies again.
Furthermore, capital gains realized on the sale of villas or residential rooms within these townships may be exempt from tax, while the capital goods necessary for their development benefit from an import duty exemption.
This type of regime is clearly designed for mega integrated projects mixing tourist accommodation, luxury residences, schools, clinics, shops, and leisure infrastructure – a format highly favored by major hotel groups and international developers.
Discretionary Exemptions: The “Custom-Tailored” Tax Approach
Beyond SEZs, the President, since the first amendment to the Income Tax Act, has the power to grant income tax exemptions to specific projects or sectors. The procedure, governed by a regulation (R-59/2022), involves:
A request from a supervising ministry is addressed to the Ministry of Finance. It is then subject to an in-depth review focusing on its impact on public revenue, its socio-economic benefits, and its strategic relevance. The final decision is made by the President, after consultation and advice from a Cabinet subcommittee.
Eligible projects must often be housed in dedicated entities, conducting no other activity than the one targeted by the exemption, with enhanced accounting and audit obligations. The list of beneficiaries and the duration of exemptions are published in the Official Gazette.
For the real estate investor, this channel potentially allows obtaining a derogatory regime, even outside SEZs, for projects considered priority (affordable housing, urban renewal, critical infrastructure, etc.).
Double Taxation: Treaties as a Safety Net
For now, the treaty network of the Maldives remains limited but progressing. Double taxation avoidance agreements are in force with states like the United Arab Emirates, India, or Bangladesh, and others (Malaysia, Hong Kong) have been signed but not yet fully applied.
These treaties work on several levers:
International tax treaties, like the one with the Maldives, provide for reduced withholding tax rates on dividends, interest, royalties, and sometimes rents. They primarily allocate the right to tax real estate income to the state where the property is located (here, the Maldives), thus securing the local tax base. Finally, they establish tax credit mechanisms in the investor’s state of residence, preventing economic double taxation on this income.
For an investor coming from a signatory country, these treaties can reduce the exit tax cost (dividends, shareholder loan interest, management fees) and improve the net profitability after global taxes.
Other Levies Related to Tourism and Real Estate Operation
Even if these levies are not, strictly speaking, “tax advantages”, it is essential to know them to measure the net effect of the incentives.
Green Tax: A Cost Passed on to the End Client
The Green Tax is an environmental tax collected per night in tourist establishments. Starting in 2025, the schedule is as follows:
| Type of Establishment | Green Tax per Person per Night |
|---|---|
| Resorts, integrated resorts, resort hotels, large hotels, tourist vessels, large guesthouses | 12 USD |
| Hotels and guesthouses ≤ 50 rooms on inhabited islands | 6 USD |
| Children under 2 years old | Exempt |
This levy is borne in practice by the tourist, but influences the “all-inclusive price” of the destination. Operators incorporate it into their pricing structure and must declare it monthly on MIRAconnect.
Tourism Land Rent and Other Recurring Fees
Land allocated to tourist establishments is subject to Tourism Land Rent, calculated based on surface area and atoll. This annual fee can weigh significantly on a resort’s profit and loss account, but it is analyzed as an element of land cost, distinct from income tax.
Annual registration fee for a private company in the Maldives, in Maldivian Rufiyaa.
Tax Governance: Legal Security and Control
Maldivian taxation is based on a self-assessment regime. Taxpayers – including foreign investors – must:
– Register with MIRA and obtain a TIN.
– File income tax returns in three installments (two advance payments, then final settlement).
– Maintain accounting records in accordance with international standards (IFRS, IAS, or AAOIFI).
– Retain supporting documents for at least five years.
In case of a tax dispute, an independent appeal process is provided (MIRA, Tax Appeal Tribunal, High Court, Supreme Court). Concurrently, the existence of general anti-abuse rules, transfer pricing mechanisms, and country-by-country reporting obligations aims to provide an attractive framework while preventing artificial arrangements.
Summary: An Attractive but Technical Tax Environment
For a real estate investor, the Maldives combines several tax assets:
The new tax regime abandons a heavy tax on the selling price in favor of taxation on the actual capital gain. It provides a wide range of exemptions, notably in special economic zones (like ‘sustainable townships’), for primary residences, inheritances, and certain social housing. Simplified deduction mechanisms for rental income and ‘custom-made’ exemptions granted by the President for strategic projects are also established. Finally, stamp duties are abolished, and a clear framework is defined for withholding taxes on non-residents.
These advantages must, however, be put into perspective with:
– Specific taxes for the tourism sector (Green Tax, Tourism Land Rent, high tourist GST).
– Mandatory withholding on flows abroad, partially mitigated by tax treaties.
– The obligation to navigate a dense regulatory environment (SEZ Act, Income Tax Act, GST Act, Tourism Act, Foreign Investment Act, etc.).
For large integrated projects (resorts, luxury residences, SEZs), the Maldives offers advantageous tax packages. For more modest investments, attractiveness relies on a reasonable capital gains regime, flat-rate deduction options, and a structured local VAT, supported by strong demand for high-end tourism.
To fully leverage these advantages, support from local tax and legal experts remains essential: the potential is real, but it plays out in the details of the laws, implementing regulations, and discretionary decisions of the authorities.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
