A global organisation representing corporate travel and business event buyers urged hotels to clarify the effects of China’s expansion of value-added tax into hospitality and other sectors.
The Global Business Travel Association said that prior to the changes being rolled out on May 1, most hotels in China charged guests a 15 per cent “service charge” consisting of a 10 per cent service charge and a 5 per cent business tax.
“This new policy transforms the hotel service charge from a business tax of 5 per cent to a VAT of 6 per cent. As a result, corporate travellers and buyers should expect the service charge should now be 16 per cent. Unfortunately, some hotel policies have been to simply add the 6 per cent VAT onto the previous service charge, creating a 21 per cent charge,” GBTA said.
GBTA China region is calling for “a dialogue and clarification” between corporate travel buyers and hotels to discuss these changes and to ensure travellers are being charged according to China policy.
“China is taking bold steps to transform their tax policy to foster a stronger economy,” said GBTA executive director Michael McCormick. “The industry must ensure it is meeting the spirit of the reform and encouraging increased travel and hotel occupancy.”
International auditors KPMG said a major issue that hoteliers face is how to deal with the broad array of services they offer – accommodation, F&B, conference and event facilities, spa and fitness-related products, entertainment services, and travel desks. “For the most part, the new VAT rules should not result in excessive compliance difficulties, though a careful consideration of all revenue streams is still needed,” it said.
While most hotel activities “should attract a 6 per cent VAT rate, some, for example the sale of spa products and the sale of products through a hotel shop, may attract 17 per cent VAT”.
