Business in the Maldives
Among Russian habitants there are those who see the Maldives not only as a paradise holiday version, but also as a potential place for starting a business. Generally, popular tourist regions don’t suffer from the lack of consumers, so the opening of even a small business and the competent management of it promises a good profit. But in order for business in the Maldives to be legal and secure, it is necessary to take into account the peculiarities of taxation, obtaining a visa, as well as to choose a good niche.
The table of contests:
- Visa to the Maldives
- Legal status of the Republic of Maldives in Russia
- Small business options
- Steps to start a business
- How to get a foreign national into a company in the Maldives?
- Is it possible to buy land in the Maldives for business?
- Buying a finished business
- Taxes in the Maldives
Visa-free stay for 30 days is allowed for people who visit the republic for business tourism. In this case, when passing passport control upon arrival in the country, it is necessary to provide a customs officer:
- foreign passport;
- a ticket confirming the date of planned departure from the territory of the state;
- vouchers confirming the tourist intentions;
- the amount of money for personal expenses, made up of $50/day.
In this case, a visa of the appropriate type will be delivered to the passport by customs officials. This type of trip is suitable for those who have not yet decided on the direction of business. In a month you can get to know the country, infrastructure, business niches, in which you can invest. At this time, you will have to choose a hotel to stay at. If you wish to reduce the cost of travel to the Maldives, you will need to book your ticket in advance.
If you are going to the Maldives with the intention of starting a business, a business visa is required. This is not a work visa, which a legal entity from the country helps you to obtain, but a visa to start your own business. In order to receive it, you should apply to the Department of Economic Development of the Republic with a business plan. If the agency approves the opening of a company, you can refer to it when applying for a business permit to enter the country.
The validity period of the issued document is equal to 3 months, before the expiration of which it is possible to extend the permit up to 1 year, and then repeat this procedure on several occasions.
A business visa doesn’t exempt from the need to inspect luggage and other mandatory procedures. All restrictions on import into the country are in force and it will not be possible for businessmen to bring alcohol with them. There are no limits on the volume of import and export of foreign currency.
It is better to contact the Migration Department to get up-to-date information on business visa processing and comprehensive consultations. The Ministry’s website contains contacts, samples of applications and timely news on changes in migration policy.
Russian legislation together with the Ministry of Finance recognises the Maldives as an offshore country. These countries offer low tax burden and other attractive conditions to foreign investors. They guarantee confidentiality of company and entrepreneur data. This means that the work of a company registered on the islands within the Russian Federation is illegal. An entrepreneur must both register a firm in the Maldives and work there.
Small business is the main niche for foreign investors, aincluding Russian ones. Their popularity is resulted from several factors:
- for small business less start-up capital is required;
- archipelagic country’s features make it difficult to build large-scale network companies and corporations (climatic constraints, complicated logistics);
- The Maldives is a recreational country where the sphere of the goods and services sector has more potential than industry.
Among those who keep or want to start a business in the Maldives, such options are popular:
- catamaran hire, water, sports equipment;
- yacht clubs with rentals, tours, walks;
- motor boats rent, sailing boats, safari yachts, ocean-going yachts;
- charter passenger transportation;
- training, equipment and support centres for diving, fishing, underwater hunting and boat trips;
- hotels, guesthouses and other accommodation facilities for travelers;
- travel and tour agencies;
- souvenir shops.
From a legal perspective, foreigners can own only one of two types of businesses in the Maldives:
- A joint venture between the republic and a foreigner in which the latter’s share is no more than 99%;
- A joint venture between a Maldivian legal entity or individual and a foreigner in which the latter has a share of no more than 49 per cent.
Unlike the previous option, the foreign national in such a company does not pay taxes.
In terms of legal form, an enterprise in the Maldives may be either a Private Company (LLC) or a Public Company (JSC).
Before applying for the opening of a company, it is necessary to make sure that its activities are not considered by the republican laws as contrary to the laws and moral and ethical norms of the country. For some types of business it is obligatory to obtain a specialized license (directions and procedure of registration are specified on the website of the Ministry of Economic Development — http://www.trade.gov.mv/).
Under Maldivian law, business activities are available to adult citizens, including foreigners, who have not previously committed illegal acts in the country. Effective infrastructure, an economic base and a favourable business climate have been created for both local and foreign investors. The prospects of starting a business are also favourably influenced by the balanced political situation in the country.
The registration of the enterprise in the Paradise Islands consists of the following stages:
- Acquaintance with the law. You cannot build a business in a country where you are not familiar with the law. Moreover, the laws and legal acts are constantly changing. To study the requirements and rules of doing business it is better to refer to official sources. For example, to the website of the Ministry of Economic Development. With a sufficient budget it is advisable to hire a Maldivian lawyer who understands the processes of registration and opening of offices, office work, state control, money transactions, etc.
- Determine the form of ownership and the name of the company. Further algorithm of action depends on the selected organizational-legal structure. The name must include a short form of ownership, such as PLC, and the absence of a similar name in the database of registered companies. The law also requires that company names do not mislead residents and comply with the norms of morality in the country.
- Collect a package of documents for the registration of a legal entity, which includes:
- Copy of foreign founder’s passport;
- Questionnaire from a foreign investor planning to start a business;
- Document from the place of residence;
- Charter of the future company;
- A letter of recommendation from the bank where the company or the foreigner opening it was previously served;
- In individual cases, additional certificates, extracts and documents that the Ministry of Economic Development considers important for the consideration ofthe request are attached;
- Investment agreement concluded with the Republic;
- An account statement from a Maldivian bank that is opened for a company. The optimal option for opening anaccount is “Bank of Maldives PLC”.It is the largest banking organisation in the country with offices in 20 archipelagos.
- Send the prepared documents to the authorities responsible for registration. The standard term for document verification and application review is 3-4 weeks. Following the results of the approval decision of the company are issued:
- state registration certificate;
- registration number;
- To start recruiting employees of the company.
A company planning to invite a foreign citizen to a working position is obliged to register him/her in the following order:
- To get a work permit.
- Open a separate deposit for the candidate with enough money to pay for his arrival and departure.
- Conclude a contract and send it to the Ministry of Labour of the Republic of Maldives for consideration.
If the Ministry approves the candidate’s employment, a work visa is issued for a period of 1 year. The employee can then ask the company for assistance in extending the permit for up to 5 years.
The current legislation of the Republic prohibits the sale of land plots to citizens of other countries. This means that legally it is only possible to lease land. If the budget is sufficient, it is possible to rent an entire island by concluding an official rent agreement with its owner. It is issued for at least 35 years, with the possibility of extension in the future. The tenant of the land plot is free to organize legal activities on this land, and taxes in favor of the state is transferred by the lessor.
Even when a foreign investor executes a purchase of a hotel, villa, house or other real estate, the registration of rents on land is mandatory. And the minimum term of the contract in this case is 50 years. The advantage of acquiring real estate in the country is the possibility to obtain a residence permit. This will simplify the procedure of staying in the country and eliminate visa red tape.
For those who are not ready to go to a hot country to build a business from scratch, there are plenty of opportunities to buy ready-made business objects. This market is mainly made up of hotel industry facilities: houses, apartments, villas, hotels. There are also offers for sale of restaurants and entertainment facilities. If you have a sizeable capital, you can take possession of a hotel complex or a small island with well-established infrastructure. It is convenient to search for real estate for purchase through a specialized website such as www.jjc.ru, www.luxinvest.eu, www.prian.ru, etc.
Another option with a ready-made business is to buy a boat or a boat for rent. Taking into account the geographical peculiarities of the country, such a business can bring a good income. It is not only about working in the field of excursions, walks or renting transport for tourists. Some businessmen buy and equip fishing boats, which are used by local people, who give the owner a large share of income (up to 50%). You will need the internet and mobile phones in the Maldives to be in touch at all times.
A simple and loyal taxation system is one of the key reasons for the country’s investment attractiveness for foreign investors. In particular, the Republic of Maldives is at the top of the list of countries with convenient taxation compiled by The World Bank.
Here are the taxes on which legal entities must pay:
- One-time tax for a foreign citizen who acquires real estate in the country. It is 4% of the transaction amount.
- Land use tax for a company that, for example, conducts agricultural activities on a leased land plot — $70/year.
- The state fee for registration of property rights is $1000.
First, these rates are lower than in most countries of the world. Secondly, it is easier to pay one tax than several (in Russia and CIS countries, sometimes dozens of them). This simply minimizes the chance to get confused in the norms and not to pay by mistake for a specific position. The country’s tax system has abolished taxes on royalties, dividends and value added.
Taxation rates for foreign individuals are also simple and loyal:
- 5% of the total income for the year is the tax liability of all foreign citizens;
- 11% of the price of the purchased property;
- 2% of the amount of banking operations performed;
- $1000 for registration of real estate objects in ownership (one-time payment).
According to the majority of experts and international agencies, the Maldives is a promising, loyal and profitable region for small and medium-sized businesses. Although the majority of foreign investors consider only the tourist service industry, the state has significant potential in the fishing industry. With respect for culture, history and tradition (what is prohibited in the Maldives), the use of modern technology and the desire to succeed, opening a company in the Maldives will be a good choice for a Russian entrepreneur.