Govt offers tax relief to creditors owed by state

President Dr. Mohamed Muizzu has declared that the Maldivian government will offer tax relief to creditors owed by the state as part of a series of measures aimed at addressing the country's ongoing fiscal and monetary challenges.

In a statement released by the President’s Office, it was confirmed that President Muizzu made key decisions on Sunday, following advice from the cabinet, to mitigate the current economic difficulties. Among these decisions is the establishment of an installment payment mechanism for settling the state’s outstanding debts to various parties, including large vendors.

Under this new system, the state will prioritize the largest outstanding bills, paying them off sequentially from monthly budget allocations, starting with the oldest invoices. For smaller amounts, payments will also be made from these allocations, but records of payments for larger and smaller bills will be kept separate.

Beyond settling outstanding debts, the government plans to enhance revenue options for its creditors by converting the owed amounts into Treasury Bonds (T-Bonds), land leases, or offering tax offsets. Additionally, President Muizzu has decided to form a special task force dedicated to recovering funds owed to the state, making the collection of these outstanding payments a top priority.

To further stabilize the economy, President Muizzu also reviewed loan options presented by the Finance Ministry and instructed the exploration of additional financing alternatives based on the cabinet’s recommendations.

On Sunday, the cabinet also announced several measures to mitigate the risks associated with the declining foreign reserves. These measures include:

Reforming laws and regulations to impose import duties in US dollars on importers who generate revenue in foreign currency.

Begin collecting pension contribution, in accordance with the Maldives Pension Act (Act No: 8/2009) in US dollars from companies that pay salaries in foreign currency

Collecting Corporate Income Tax in US dollars from companies that earn revenue in foreign currency.

As the Maldives government continues efforts to manage growing state debts, it faces significant foreign currency constraints. President Muizzu revealed in July that the state was owed MVR 15.4 billion by various parties. Both the government and the parliament have initiated efforts to recover these outstanding sums, with the President expressing confidence that their recovery will help resolve the nation’s debt issues.