Here’s What You Need To Know About The New Tourism Tax
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Not too long ago, Malaysians woke up to the fact that come August 1 this year, they’ll have to pay more when putting up a night at a hotel. Enter, the Tourism Tax (TTx).
Like all tax-related matters, the move was greeted with mixed reactions. Singaporeans are unfazed, confident that the stronger Singaporean dollar would mitigate the introduction of the new tourism tax.
Some Malaysians, however, are not as optimistic. In a report, CIMB Research said TTx could hurt hotel owners while the Institute for Democracy and Economic Affairs (Ideas) believed the country’s World Competitiveness rankings will be severely affected, citing the tax’s untimely entry into the tourism market.
The good news is Malaysians are exempted from the tax but foreign tourists will have to pay a flat rate of RM10 per night. So here’s what you need to know about the tax:
Breaking it down
When the Dewan Rakyat approved the Tourism Tax Bill 2017, Tourism and Culture Minister Datuk Seri Mohamed Nazri Aziz said the tax collected would be in the region of RM654.62 million if the overall occupancy rate for the 11 million “room night” in the country would achieve 60%.
What is room night?
Room night, or room/night, is a measure of occupancy where a room is the unit of measure.
This is opposed to bed/night occupancy, where one calculates the number of beds in the entire hotel (a room can have more than one) against the nights each of them are booked.
For example:
A hotel has 10 rooms each with 2 beds. If 5 separate people book 5 rooms for all 30 days in the month of June, the hotel has a room occupancy or room/night occupancy of 50% for April.
But there are 20 beds spread out over these 10 rooms. If these same 5 single and separate people booked the 5 rooms for all of April, the bed/night occupancy would be only 25%, because 5 beds were used out of a possible 20 for June.
Source: Djaunter
Nazri believes that with proper promotion and 80% occupancy rate, RM872.82 million can be collected which could provide a sustainable fund every year to develop the tourism industry and make it more competitive.
According to an early Customs Department circular, the tax is charged at a specific rat, based on hotel ratings. But the government decided to scrap that and announced a flat fee of RM10 a night. Here’s how this differs from the other charges imposed at hotel rooms nationwide:
| Tourism tax | Fixed rate nationwide @ RM10 a night. |
| Service charge/Property tax | 10% on room rate |
| Goods and services tax | 6% on room rate |
| Heritage tax/surcharge/local government fee (varies from location to location): | Penang = RM3 per room night @ 4- and 5-star hotels, RM2 per room night for 3-star and below including all dorms, budget hotels, hostels and guesthouses. Langkawi = RM9 per night on all hotel stays. Melaka = heritage tax fee of RM2 imposed per night. |
And, here’s the list of properties exempted from the tax:
- Homestays registered with Ministry Of Tourism and Culture (Motac);
- “Kampungstays” registered with Motac;
- Accommodation premises established and maintained by religious institutions not for commercial purpose; or
- Accommodation premises with less than 10 rooms.
- Accommodation premises operated by the federal government, state government or statutory body for training, educational or accommodation not for commercial purposes.
Credit: Customs Department
So how do we go about this?
So as this affects foreign tourists, let’s see how this affects them. Based on the list above, one caveat about the tax is that it exempts Airbnb properties. So, let’s say you are planning a one-night stay in Tanjung Bungah, Penang, for two people.
Here’s how much you are expected to pay for a 3-star hotel versus an Airbnb unit:
| 3-star hotel | Studio unit (Airbnb) | |
| Room charge | RM204 | RM158 |
| Service charge @ 10% | RM20.4 | RM21 |
| Goods and services tax @ 6% | RM12.24 | - |
| Local government fee | RM2/night | - |
| TTx: | RM10/room night | - |
| Total: | RM248.64 | RM179 |
If you stay for a 4-day, 3-night stay, you would be incurring RM745.92 for a short vacation in Penang. Before TTx, the amount would have been RM30 cheaper.
On the other hand, with Airbnb you save RM235.92! But – there’s always a “but” here – before jumping onto the Airbnb website, weigh the pros and cons.
Sometimes Airbnb hosts may not support a self-check-in option, which can lead to a pretty hectic experience. Then, there’s the hassle of getting in touch with your host and dealing with potentially annoyed neighbours, especially if you arrive late at night.
Even parking can be a pain, where in some cases, the owner might allow you to park in his or her slot, but your car will still get clamped due to it being an unregistered vehicle.
Also, not forgetting, a lot of properties do not welcome Airbnb guests. In many residential neighbourhoods, you’ll be greeted with a “No Airbnb Allowed” signage. That can lead to an uncomfortable experience.
As for hotels, though it might be pricier, you can easily check in at any time of the day, you get free breakfast and room service/housekeeping services. For hotels, the service has to be on par with the hotel rating as these forms of accommodation are regulated while Airbnb and the likes aren’t.
Sometimes, depending on the nature of your stay, a hotel spells convenience and that can make or break your getaway or trip.
It’s all about planning
TTx is here to stay. The good part about the tax is that it is a fixed rate, so regardless of your hotel ranking, you only pay a flat fee. The bad part is just the extra fee, on top of all the other surcharges you are expected to pay.
If you are foreign tourist, what you can do to dampen the effects of the tax is to simply plan your vacation better. If you want something a little cheaper, go with Airbnb or a homestay as these are exempted.
If you want comfort and ease of mind, then a hotel is what you need and you’ll just have to pay the tourism tax.
Either way, the important travel axiom stays: you get what you pay for. Happy budgeting!
*This article was updated to reflect the current changes to the Tourism Tax. Earlier, the tax stipulated that everyone, including Malaysians, would need to pay a fixed rate according to hotel rankings. But the Tourism Ministry has revealed that only foreign tourists will be charged a flat rate at hotels nationwide.
