Six to Twelve Months Adjustment Period Necessary for Malaysia New Tourism Tax

Passed by Malaysia’s Parliament in the first days of April, the country new tourism tax will need adjustments for travel and tourism-involved businesses, ask travel players.

The tourism industry will need about six to 12 months to get ready for the proposed new Tourism Tax, given that the key operational and practical aspects of the tax have not been finalised including exemptions, said a tax expert. Deloitte Malaysia Indirect Tax Partner, Senthuran Elalingam said early preparation, engagement and consultation were critical as implementing the tourism tax would give rise to extra costs to industry players especially accommodation providers.

The Tourism Tax Bill 2017 as designed by Tourism and Culture Minister Mohamed Nazri Abdul Aziz is looking at levying a tourist fee on a tourist stay at any accommodation at the official rate fixed by the Minister in accordance of the law. When presenting the law to Parliament, Nazri estimated that revenues from the future tourism tax would probably represent RM 654.62 million (US$160 million), an estimated number based on an overall occupancy of 60% for the 11 million room nights registered in the country.

“With proper promotion and 80 per cent occupancy rate, RM872.82 million (US$212.9 million) can be collected,” said Mohamed Nazri, adding that the tax collected could provide a sustainable fund every year to develop the tourism industry and ensure tourism becomes even more competitive.

In the bill,a tourist will have to pay directly the tourism tax to the operator of the accommodation premises.

However, the Ministry confirmed at the end of this week that homestay and Kampung Stay as well as and pusat latihan asrama (boarding schools) registered under the ministry will be exempted for the new tax. According to the ministry, rates are fixed at RM20 (US$4.87) for a five-star accommodation, RM10 (US$2.43) for a four-star accommodation, RM5 (US$1.22) for one- to three-star properties and only RM2.50 (US$0.61) for non-rated accommodations, including bud­get hotels.

The tax will be perceived on on a per-room and per-night basis and not on a per-head basis. The Ministry justified classically the introduction of the tax by the fact that other countries do it and sometimes levy higher fees than in Malaysia. According to the Ministry of Tourism, Malaysia hopes to welcome this year 32 million foreign travellers. No date has been announced yet as it is still debated in parliament but the Ministry is hopeful that it will coming into application before the end of the year.

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