For foreign investors targeting the Maldives’ hotel sector, understanding the foreign investment registration process is an essential first step. Typically a standardized and automatic process, it provides the foundation for investment activities in the region. This article delineates the details of this process, from foreign investment registration rules to the latest updates in the Foreign Direct Investment (FDI) policy. This article aims to present a comprehensive overview of the process to aid investors in making informed decisions.
The Appeal of Hotel Investment in the Maldives for Foreign Investors
The Maldives has positioned itself as a key destination in the Indian Ocean for hotel investments. With the consistent growth in international tourism, there is an increased demand for high-end accommodations, making it a strategic market for global hotel investors. Foreign investors exploring opportunities in the Maldives’ hotel and resort sector will also find a conducive regulatory environment.
Key Benefits for Foreign Investors
100% Foreign Ownership: Complete ownership in a Resort or Hotel business, eliminating the need for local joint ventures or partners.
Efficient Entity Registration: Swift and hassle-free registration processes.
Lease Duration: Possibility of long-term land leases extending up to 99 years.
Visa Provisions: Corporate Resident Visas valid for five years, with the option for extension.
Overseas Arbitration: Disputes can be taken to overseas arbitration, providing a level of comfort for foreign investors.
Recognition of Foreign Awards: The Maldives acknowledges and enforces foreign arbitral awards.
Investment Programs: Dedicated programs for foreign portfolio investors.
Custom Duty Exemptions: Available for large-scale projects.
Contract Flexibility: Contracts can be governed by foreign laws.
Talent Recruitment: Discretion in hiring foreign managerial, technical, and unskilled workers.
Financial Freedom: Absence of foreign exchange restrictions and no limitations on repatriating profits or capital proceeds.
These features amplify the attractiveness of the Maldives as a prime destination for hotel investments, offering not only the allure of its scenic beauty but also a favourable business environment.
Navigating the Foreign Investment Registration Process
Before acquiring any island, land, or lagoon for hotel ventures, foreign investors must first obtain approval and register their business with the Ministry of Economic Development (MED). This adherence to the ‘Law on Foreign Investments in the Maldives’ [Law No. 25/79] and the ‘Foreign Direct Investment Policy’ ensures that investments align with the nation’s development goals and standards. This section breaks down the essential components of this process, paving a clearer path for potential investors:
Process Overview
Foreign Investment Approval: Every foreign investor, whether an individual or a legal entity, must first secure foreign investment approval from the MED. This approval is an essential first step for foreign businesses intending to operate in the Maldives.
Business Entity Incorporation: After obtaining foreign investment approval, the next step is to incorporate the business entity with the MED. This step confirms the business’s legal and operational status in the Maldives.
Signing of the Foreign Investment Agreement: Following business incorporation, the Foreign Investment Agreement must be signed. This agreement finalizes the foreign investment registration process.
Required Documentation for the Application
Details of the Proposed Company: Information about the intended company setup is mandatory.
Financial Credibility Letter: A document from a recognized bank that confirms the financial capability of each investor involved in the proposed company is necessary.
Application Fee
A USD 5000 fee is applied at the outset of the foreign investment application procedure.
Timeline
The process, from the application initiation to the foreign investment registration, is efficient, generally spanning five to eight working days.
For foreign investors, familiarizing themselves with these steps ensures a streamlined entry into the Maldivian hotel investment market.
New FDI Policy Guidelines: A Closer Look
The MED recently unveiled a new FDI policy. This policy, which took effect on 11 February 2020, introduces a two-pronged approach to the approval of foreign investments: the Automatic route and the Government route.
Automatic Route:
Ensures immediate approval during the application stage, granted all criteria are met and documentation is in order. These applications are processed swiftly, within just two working days.
For Tourist Resorts: 100% foreign shareholding is permissible, with no specified initial investment amount for the first five years. The maximum duration of the Foreign Investment Agreement is aligned with the lease period.
For Tourist Hotels: The foreign shareholding allowance remains at 100%, but there’s a minimum initial investment requirement of USD 1,000,000 for the first five years.
Government Route:
Designed for applications that are more case-specific or sensitive in nature, which may not meet the direct criteria set for the Automatic route. These applications undergo a more detailed review, often involving consultations with other stakeholders and government agencies. Processing time is capped at 14 working days maximum.
Note: This route is pivotal for situations that require deeper insight and collaboration due to their distinct nature.
Establishing Your Hotel Investment in the Maldives
After obtaining the necessary approvals, investors must incorporate their business in the Maldives and subsequently register their status through signing the Foreign Investment Agreement.
Company Incorporation:
Types of Business Entities:
Maldives Incorporated Limited Liability Company or Partnership: A common choice among investors in the Maldives.
Foreign Incorporated Company: Entities registered abroad must re-register with the Registrar of Companies at the MED to function as an overseas branch.
Acquiring Shares from a Locally Incorporated Company: Investors can choose to acquire either partial or full ownership of an existing local company.
Key Incorporation Requirements:
Directors and Partners: A minimum of two directors or partners is mandated for registration with the MED. Notably, one director must reside in the Maldives, which can be a foreign director with a valid work visa.
Incorporation Fee: A nominal fee is required to complete the incorporation process, coupled with the submission of essential documents.
Registration of the Foreign Investment:
After the company’s incorporation, investors are required to sign the Foreign Investment Agreement with the MED. This completes the registration of the foreign investment.
With foreign investment registration complete, investors are ready to commence their investment endeavours in the Maldives’ hotel sector.
Conclusion: Investment in the Maldives’ Hotel Sector
The Maldives’ hotel sector offers clear opportunities for investors. The foreign investment policy is straightforward and favourable, allowing for 100% foreign ownership, no minimum investment for resort ownership, and a series of other tangible benefits. This makes it a compelling proposition for those looking at long-term, high-value returns.
However, as with any international investment, understanding the specific regulatory and procedural landscape is crucial. The Maldives has its set of rules and guidelines, and while they are investor-friendly, they require a clear understanding to navigate effectively.
For those considering an investment in the Maldives’ hotel and resort sector, seeking expert legal advice isn’t just recommended, it’s essential. Professional guidance can streamline the process, clarify potential areas of confusion, and ultimately ensure that the investment journey is as smooth and profitable as possible.
