Hotel Turnover Tax Act 2006
Introduction
1. The Government introduced the Hotel Turnover Tax Bill 2006 (No 4 of 2006) to the House of Representatives on 16 February 2006 as part of its 2006 Budget implementation measure.
Implementation Date
2.Government intended that the Act come into force on 1 April 2006, however the Minister for Finance has gazetted 1 June 2006 as the implmentation date (Legal Notice 24, 2006).
3. The Minister of Finance on 4 November 2005 in his 2006 Budget address announced a 5% room surcharge specifically on bed usage or on hotel rooms excluding other hotel charges incurred.
4. Following consultations with the Fiji Islands Revenue and Customs Authority (FIRCA), Ministry of Finance (Finance), Ministry of Tourism and the hotel industry, Government agreed to substitute a turnover tax instead of a surcharge. Government estimated that the revenue generated from this tax would amount to $13m.
5. The Government has therefore agreed to a 3% turnover tax on all services provided by hotels, including accommodation, refreshment, bar sales and miscellaneous charges.
6. The Minister for Finance has promulgated the Hotel Turnover Tax Regulations 2006 (“regulations”) to clarify that a service that is not operated or provided by a
hotel is not subject to tax. Such service would include transfers, duty free
stores, restaurants, or dive shops.
Key Features
7. Include:
• a 3% levy is imposed on the guest’s bill at a hotel and the person liable for the tax is the hotel guest.
• the hotel is responsible for collection of the tax and paying over to the Commissioner with 30 days after the last day of each month
• definition of hotel turnover includes payments received by a hotel for accommodation, refreshment (food and alcohol or other beverages) and any other charges included in the guest’s hotel charges.
• Hotel is defined as one which is licensed under the Hotels and Guest Houses Act and would include a vessel where a passenger is provided overnight accommodation
• Penalties
Failure to pay turnover tax on time will attract a penalty at the rate of 10%, with an ongoing default will result in a additional 2.5% penalty rate per month
A failure to provide a return is an offence and liable on conviction to a maximum fine of $5,000
The regulations are to come into force on 1 June 2006
No Tax On Tax
8. To ensure that a cascading effect on taxes is avoided, the Hotel turnover tax will only apply to the VAT exclusive component of the hotel bill. So turnover tax will not be charged on the VAT portion of the bill. No tax on tax!
Hotel Guest
9. While a hotel guest is not defined it would appear that if a hotel operates a restaurant and provides meals to non-residential guests then the restaurant charges would incur the turnover tax.
Operational Requirements
10. The Minister has indicated that operational requirements are yet to be finalized with the industry.