In response to the expansion of the scope of the Value Added Tax (VAT) in China, GBTA issued the press release below:
On 5 March 2016, China’s Premier Li Keqiang announced the expansion of the scope of the Value Added Tax (VAT) to several key sectors including hospitality to take effect from 1 May 2016.
Prior to this announcement, most hotels in China charge guests a 15 percent “service charge” consisting of a 10 percent service charge and a 5 percent business tax. This new policy transforms the hotel service charge from a business tax of 5 percent to a VAT of 6 percent. As a result, corporate travelers and buyers should expect the service charge should now be 16 percent. Unfortunately, some hotel policies have been to simply add the 6 percent VAT onto the previous service charge, creating a 21 percent charge.
The Global Business Travel Association (GBTA), the voice of the global business travel industry, and its GBTA China region call for a dialogue and clarification between corporate travel buyers and hotels to discuss these changes and to ensure travelers 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 W. McCormick. “The industry must ensure it is meeting the spirit of the reform and encouraging increased travel and hotel occupancy.”