New law to widen tourism tax scope by Jan. 2023
The draft law of the Amendment to the Tourism Tax Regulation will initially come into effect January 1 next year, the Secretary for Economy and Finance Lei Wai Nong presented Friday.
Lei said that the reason of amending the Law no. 8/2021 (the Hotel Industry Establishments Activity Law) is to establish a new legal regime for hotel industry premises and adjust the classification and designation of hotel industry and catering establishments.
“This law proposes an amendment to the Tourism Tax Regulation, approved by Law 19/96/M, of August 19, in order to include the services provided by these establishments in the scope of the tourism tax,” he said.
Moreover, more than 25 years have passed since the Tourism Tax Regulation was implemented in 1996.
Following new industrial development in recent years, there is some controversy in practice regarding the scope of the Tourism Tax Regulation. “Therefore, this draft law recommends that the provisions on the application of the tourism tax be amended to more clearly define its application,” Lei explained.
In other words, this bill provides that the scope of the tourism tax will change from “services rendered” by hotels, restaurants, karaoke bars, among others, to “goods and services rendered, directly or indirectly” by them, including “goods” in the scope of the tax.
The draft bill suggests a redefinition of the scope of the exemption from the tourism tax, to include goods and services provided by two-star hotels, low-cost accommodation; simple dining establishments, kiosks of the restaurant areas; drinking and eating establishments are exempt from tourism tax.
It should be noted that this tax rule corresponds to the current practice of the taxation authorities, which is based on court decisions, and this proposed change is only aimed at clarifying the respective tax rule in legislative terms.
Lei said, the introduction of the rule on the effectiveness of the law aims to set aside an adequate period of time for the tax administration to promote widespread knowledge of the new law and compliance with the law by taxpayers […], which “is considered more appropriate for the budgetary management of public finances.”
Director of the Economy and Finance Iong Kong Leong added that the annual tourism tax revenue ranged from MOP808 million to MOP960 million from 2017 to 2019, and from MOP120 million to MOP160 million from 2020 to 2021.
He stated that in the past two years, tourism tax revenue was affected by the Covid-19 pandemic and the introduction of tax incentives. The balance of the Tourism Fund as of last year was initially calculated at about MOP16.3 million.
