Belize Hotel Service Charge is Now Subject to Business Tax

The Income Tax Department has recently made a ruling that all service charge collected by the Hotels/Resorts are now subject to business tax. This ruling is retroactive and if it is determined that during an income tax audit that service charge was previously collected and not paid, and assessment will be raised for the corresponding business tax in addition to interest and penalties.

Most hotels/resorts do not benefit financially from collecting the service charge and periodically all that is collected is eventually distributed to their employees and form a part of their total emoluments (subject to income tax p.a.y.e.). As such, service charge might be deemed conduit funds, which to the best of my knowledge is not subject to business tax.

This is supported by Section 2 and Section 16 (1) of the Hotels and Tourist Accommodations Act which states:

“service charge” means any money or other thing of value collected or received from a guest or customer of any hotel, tourist accommodation building, restaurant, cafe, nightclub or other place of entertainment or hospitality, which is excess of the basic contractual liability of that guest or customer and is, or is purported to be, collected or received in respect of the quality of service afforded to that guest or customer, and without prejudice to the generality of the foregoing, includes any sum, whether calculated on the basis of a fixed percentage or otherwise, levied on the amount charged to such guest or customer and expressed to be in respect of service;"

16.-(1) Any service charges collected or received by a proprietor or employer from guests or customers shall be distributed among employees in accordance with the provisions of a scheme prescribed or registered under the provisions of this section, and in the absence of any such scheme, by agreement with the employees.

As such, Tourism related interest, Resorts/Hotels are encouraged to include the service charge collected in their business tax calculation.

Wilfred Rhaburn, CPA

Wow. The service charge item charged by some resorts (mostly higher end) has always been confusing to me, anyway. Was it supposed to be paid to the employees as a sort of mandatory tip? Or was it a surcharge or "resort" fee charged by the accommodation? At least this clarifies what it was intended for. But now this new tax reg reads like a tax on the 10% service charge which was intended to be a mandatory tip for employees! That sounds nutso.

...presumably one can "collect or receive" something that has not been "levied" without incurring business tax? Otherwise the Income Tax Dept has now put a business tax on all tips received, like that shilling your might leave on the bar after enjoying a cold Belikin.

Maybe that's the ticket... don't "collect" or "receive" it. I mean if someone leaves an envelope on a table...

They might as well drop the service charge. We've always avoided those lodgings that charge the extra $ because we'd tip whether or not they pass on the 10% and we didn't want to have to wonder what became of it after we checked out.

Agreed... unlike a lot of places here, we DON'T have a service charge... tips/gratuity should be earned.

The flip side of that position is that in a large resort especially, there are many workers who work real hard behind the scene to make a visitor's stay a pleasant experience.

Those workers without the benefit of a service charge would never be rewarded, except with their normal pay. A system with a service charge can be used to reward these workers instead of making it so only housekeeping and restaurant employees who come in contact with guests receive the rewards. This in the hope that these rewards will insure the highest level or service.

Best policy is a tip box at checkout. Love Chan Chich for that reason.

Who says the behind the scenes workers should be left out of tips? My point was that a tip should not be automatic. If our guests feel like leaving a tip upon departure, fantastic, it means we're doing our jobs. We thank them, and let them know that, less they have specific instructions, it gets dispersed amongst 100% of the staff.