Member Article

On October 15^th 2013 the New Hotel and Restaurant (Taxation) Ordinance 2013 came into effect. This ordinance amends the former Hotel and Restaurant (Taxation) Ordinance which was into effect prior to October 15^th.

There are a wide range of new provisions which clients should be aware of.

PREMISES TO WHICH THE ORDINANCE APPLIES

The first and far reaching effect of the new Ordinance is that the provisions of the Ordinance applies to any premises used for providing board and lodging or lodging only regardless of whether the proprietor receives a reward or does not. The consequence of this is the fact that all premises which are used to accommodate persons other than Belongers, PRC holders and work permit holders even in instances where the proprietor does not receive a reward are included under the terms of the Ordinance and must adhere to its provisions including registration with revenue authorities, filing returns etc.

Moreover a key change is also to what it means for a proprietor to receive reward. Reward has been defined as money or otherwise and so can include non-financial compensation.

GUEST REGISTERS, GUEST STATEMENTS and ACCOUNTS

Proprietors are now required to keep their guest registers, guest statements and accounts for a period of 24 months instead of the former 12 months.

The documents proprietors are required to keep for a period of 24 months have been extended to include original return form; statements showing the service provided, the charges incurred and the service received; financial statement, notes clarifying transactions; bank deposits; sales books and ledgers.

TAXABLE CATEGORIES

The categories on which accommodation tax is payable on has been extended. Guests now not only have to pay a total of 12% on the total of charges including sleeping accommodation meals, beverages, lighting, fuel, water, furniture, domestic appliances and equipment and laundering, but also on the new categories of any privilege, amenity, facility or service for any cultural or recreational activity or pursuit as well as any other privilege, amenity or facility in connection with the guests accommodation.

DETAILS OF AGENT TO BE FILED WITH PERMANENT SECRETARY FOR NON-RESIDENT PROPRIETORS

The practice of filing the name of a representative who will be acting on behalf of a non-resident proprietor with the revenue control authorities has now been made a legislative requirement.

NOTICE OF NON BOOKINGS

In addition to filing a return in months where no guests have been accommodated, proprietors are now also required to notify the revenue authorities within seven days of any given month where they have no bookings for that particular month.

TIMEFRAME FOR CLAIMING A REFUND

The timeframe for proprietors who have overpaid accommodation tax by mistake for any particular period has been reduced from six years to two years.

POWER TO OBTAIN INFORMATION

The powers of the revenue authorities have been extended in the area of information gathering for tax determination purposes. Revenue authorities now have the power to require proprietors to furnish information, attend for examination, produce computers and records and provide access to their premises for examination. Revenue authorities also have the authority to retain possession of books of account, records and computers for further examination where it is suspected with the correct disclosure has been made with respect to tax liability.  Moreover a proprietor’s bank or other financial institution can be required to provide details of the proprietor’s bank account and or other asset and make those records available for inspection by revenue authorities. This is notwithstanding rules of law relating to privilege.

PENALTIES

Overall, the fines and penalties in the Ordinance have increased:

1. Penalty for non payment of taxes

Instead of the previous penalty, the penalty in cases where proprietors fail to pay any amount of tax due, is 10% of the amount of the outstanding tax for each month or part of a month that the tax remains unpaid.

2. Penalty for non compliance with the Ordinance

It is important for proprietors to comply with the terms of the ordinance, particularly with respect to keeping and filing records and information, otherwise the penalty is $25,000 on conviction or imprisonment for two years or both.

3. Penalty for fraud and falsifying information

Any person knowingly involved in or who takes steps to avoid payment of the requisite tax or makes false returns or provides false information to avoid payment of the relevant amount of tax is liable on conviction on indictment to a fine of $100,000 or imprisonment for a term of three years or both. On summary conviction the fine is $50,000 or imprisonment for twp years or both.

4. Penalty for obstruction – whether obstruction of access to premises or otherwise is $25,000 or imprisonment for 6 months or both.