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Foreign (Hotel) Commissions now Taxed 15%

Posted By: Portofino

Foreign (Hotel) Commissions now Taxed 15% - 02/05/09 01:48 AM

FYI
Income and Business Tax (Amendment) (No.2) Act, 2008, which came into effect on January 1, 2009 is requiring that all payments of commissions to a non resident (travel agents included) that there should be a 15% withholding tax. So not the 9% Hotel tax but 15% income tax to be paid on foreign commissions.
Jan

Originally Posted by Amendment
4. Section 113 of the principal Act is hereby amended as follows:

(i) by adding the following new subsection (3a) immediately after subsection (3):

(3a) Every person who pays any royalty or commission to a non-resident shall deduct there from tax at the rate of fifteen percent of such payment and shall forthwith render an account and

remit the tax so deducted to the Commissioner and every such amount shall be a debt owing from him to the Government and shall be recoverable as such.
Posted By: Banana Beach

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/05/09 04:30 AM

There seems to be more and more foreign real estate brokers in the game these days and as our local brokers have to pay 15% on their commissions I think it is fair to tax the foreign brokers the same rate too.

As for tourism sector- this is an absolute "no go" and has already been beaten way back when by the use of NET rates. Instead of using Rack rates and % commissions hotels just work off of NET rates that are given to travel agents/wholesalers. This is how the terminoligy of NET rates originated.
Posted By: Katie Valk

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/05/09 02:59 PM

I was told this is a misinterpreation of the tax law and someone is supposed to get back to me to explain what it means.
Posted By: Peter Jones

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/05/09 04:19 PM

Originally Posted by Banana Beach
As for tourism sector- this is an absolute "no go" and has already been beaten way back when by the use of NET rates. Instead of using Rack rates and % commissions hotels just work off of NET rates that are given to travel agents/wholesalers. This is how the terminoligy of NET rates originated

Can you explain this for the benefit of people not in the hotel business (like myself)? Is it irrelevant for me to say that I thought the tax was calculated on a payment basis?
Posted By: Barbara K

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/09/09 05:56 PM

Instead of hotels charging travel agents and wholesalers the "rack" advertised rate, and then paying us the commission, they charge us a "net" rate which we can then mark up as much or as little as we like, in essence making our own commission structure. So we pay them the net rate and they do not pay us any commisssion, so they are not taxed on it. The clients end up paying the "commission" mark up, not the hotels.
Posted By: Peter Jones

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/09/09 06:02 PM

OK, I understand. And I can see some pitfalls too.

May I point out Michael Fox's new column under "Nation". This should be a great information resource.
Posted By: Cybercayecaulker.com

Re: Foreign (Hotel) Commissions now Taxed 15% - 02/11/09 05:24 AM

I culled this from a BTIA email.
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The Ministry of Finance has agreed that the intent of this amendment was not to target the Tourism Industry and has agreed that they will make the necessary amendments to exempt non-resident contractors to the Tourism Industry. Please review the potential affected non-resident contractors to be included in the list of exemptions. Please let us know as soon as possible if this is a sufficiently complete list, or if there is any other entity to be added.

1. Travel Wholesalers

2. Foreign Travel Agents

3. Franchises (in the case of branded hotels)

4. Marketing Contractors

5. International memberships and Co-op marketing subscription fees

6. Internet Marketing Providers
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My only comment is: "Well, duhhh." I'm sure I'll regret saying it though.
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