Overview

The 1st Amendment to the Special Economic Zone Act (Law No. 18/2025) (the “Amendment”) came into effect on 10 November 2025. The Amendment introduces substantive reforms to the Maldivian legal framework governing Special Economic Zones (SEZs). This article outlines the principal changes to the Special Economic Zones Act (Law No. 24/2014) (the “Act”), with particular focus on the new “Sustainable Township” category, enhanced definitional clarity, targeted incentives, and strengthened sustainability benchmarks.

Introduction of the Sustainable Township SEZ

A central feature of the Amendment is the creation of “Sustainable Township” as a distinct SEZ classification. Defined as a residential area under single management, it integrates real estate or tourism components with sustainable infrastructure and stringent environmental criteria. This category did not exist under the original Act, which concentrated on business, industrial, technological, and trade zones.

Expanded Definitions and New Investment Categories

The Amendment broadens the definition of “Special Economic Zone” to encompass the newly introduced zone types, including Sustainable Townships. It also introduces and defines new terms such as “Large-Scale Real Estate Development” and “Large-Scale Integrated Tourism Development,” each subject to a minimum investment threshold of USD 500 million and specified features.

Eligibility and Development Requirements for Sustainable Townships

The Amendment prescribes comprehensive and prescriptive eligibility criteria for Sustainable Townships, marking a departure from the original Act’s more general prerequisites. Key requirements include:

• Minimum investment of USD 500 million;
• Compulsory provision of an integrated tourism development including various luxury tourism services or large-scale real estate facilities including various luxury tourism services and luxury residential facilities;
• Requirement of international standard training or healthcare centres;
• At least 60% of all energy used must be derived from renewable sources;
• Self-sufficiency in energy and waste management;
• Facilities for sustainable food production by reducing imported food to Maldives; and
• Mandatory residential, educational, healthcare, and recreational facilities for inhabitants.

Targeted Concessions and Bespoke Taxation

The Amendment introduces a tailored concessions and taxation framework for Sustainable Townships, replacing the original Act’s broader, non-categorised incentives.

• Property transfer tax on long-term lease of strata titled villas or rooms, and on sales of related rights, is imposed on a graduated basis: 1% on the first transfer, 2% on the second, and 4% on subsequent transfers. 
• A reduced income tax schedule applies to businesses in Sustainable Townships: 5% for the first 10 years, 10% for the next 10 years, thereafter, reverting to standard rates under the Income Tax Act (Law No. 25/2019). 
• Profits from the sale of a residential villa or room in Sustainable Townships are exempt from tax levied under the Income Tax Act. 
• Import duty exemptions on capital goods imported for the development of Sustainable Townships.

These tailored regimes were not present in the original Act; furthermore, Sustainable Townships are expressly excluded from any additional concessions beyond those specified in the Amendment.  

To align with current tax nomenclature, references to “tax levied on business profit” have also been replaced with “tax levied on business income.”

Sustainability and Environmental Benchmarks

A defining characteristic of the reform is the imposition of binding sustainability standards for Sustainable Townships. These include mandatory sustainable infrastructure, a fixed minimum of 60% renewable energy usage, and self-sufficiency in certain utilities—benchmarks that the original Act did not quantify or require. Previously, the Act encouraged environmental responsibility without setting binding thresholds.

Implementation Timeline

The relevant authorities are required to draft and publish the regulations necessary for the operation of the Amendment within six months of it coming into force.

Conclusion

The 1st Amendment marks a significant recalibration of the Maldives’ SEZ regime by introducing the Sustainable Township category with stringent eligibility, sustainability, and infrastructural requirements, and a bespoke concessions and taxation framework. It refines definitions, updates tax terminology, and introduces targeted administrative provisions, collectively creating a more prescriptive, sustainability-focused environment for large-scale development—departing from the original Act’s broader and more flexible approach.