A LoyaltyLobby reader alerted me the other day to the changes in China (mainland only) that will affect hotel pricing (basically making them more expensive).
Until now, there has been a 5% Business Tax that will become 6% VAT on May 1, 2016. Many hotels have only been charging 10% or 15% service charge, but will start adding this 6% VAT from May 1st.
This VAT is calculated from the combined room rate + the service charge. When the service charge is 15%, the combined service charge + VAT add 21.9% to the room rate.
Here’s how this is shown on various hotel websites:
15% Service charge + 6% VAT for a stay in June.
What is weird that the service charge is only 10% in April + 5% business tax.
Only lists 15% service charge for a stay in June
Just shows the service charge and tax amounts, but not the percentages.
For a stay in April, only the service charge is listed.
Only lists the 15% service charge for a stay in June.
There is, however, a note that the sales tax will be added.
This 15% service charge that most of the hotels have been charging seems to be consisting 10% service charge + 5% business tax. Now, the hotels are merely adding the 6% sales tax in top of the 15% service charge making the “tax” 21.9%.
Hotels can deduct VAT expenses from their VAT payables. This apply for Chinese business travelers too.
Seems that hotels are double dipping here on guests expense and there really shouldn’t be 15% service charge in the first place!