Hotel Accommodation Tax

The collection of HAT will resume on 1 January 2025, with a tax rate of 3% on accommodation charge.

According to the Hotel Accommodation Tax Ordinance (Cap. 348), HAT is levied on all accommodation charges made by a hotel or a guesthouse.

"Accommodation charge" means "the sum payable by or on behalf of guests for accommodation received"; "Accommodation" means "any furnished room or suite of rooms hired by the proprietor of the hotel to guests, or for the use of guests, for lodging and includes such furnishings, appliances and fittings as are normally provided therein". Hence, accommodation charge includes all charges generally payable for providing hotel accommodation such as extra beds, cribs, holiday / themed decorations and late check-out.

Service charge (normally at 10% of accommodation charge), in-house dining expenses, charges for hotel facilities (such as spa massage, chauffeur-drive and beauty treatment), services of the business centre (such as printing, fax, photocopying and rental of conference rooms) and concierge services (such as tickets booking, restaurant reservation and car rental services), and additional charge for consumable items (such as extra toiletries and personal hygiene items) are not required to be included in the calculation of HAT.

A hotel is only required to pay to the Inland Revenue Department (“IRD”) the amount of HAT payable. All other payments collected from guests should be handled by the hotel itself.

According to the Hotel Accommodation Tax Ordinance, “hotel” means “any establishment, the proprietor of which holds out to the extent of his accommodation that he will provide accommodation to any person presenting himself who is able and willing to pay a reasonable sum for the services and facilities provided and is in a fit state to be received”.

“Accommodation” means “any furnished room or suite of rooms hired by the proprietor of the hotel to guests, or for the use of guests, for lodging and includes such furnishings, appliances and fittings as are normally provided therein”. Therefore, the charges for furnishings, appliances and fittings provided in a hotel room will be included in the calculation of HAT.

According to the Hotel Accommodation Tax Ordinance, accommodation that is exempted from HAT includes that provided by: (i) a hotel containing less than 10 rooms normally available for lodging guests; and (ii) a society not established or conducted for profit.

The Hotel Accommodation Tax Ordinance has not defined “a society not established or conducted for profit” (“non-profit-making society”).  Generally speaking, all charitable bodies that have been granted tax-exempt status under section 88 of the Inland Revenue Ordinance (“IRO”) will be accepted by the Inland Revenue Department (“IRD”) as non-profit-making societies.  In other words, if a hotel or guesthouse is operated by these charitable bodies, it will be exempted from payment of HAT.

For a hotel or guesthouse which is operated by a non-profit-making society other than the above-mentioned charitable bodies, IRD will consider it on a case-by-case basis having regard to the society’s own circumstances.  IRD will examine the governing instrument for the establishment of the society to ascertain whether it meets the conditions of a non-profit-making society.  In general, a non-profit-making society should have the following features: the objects and operation of the organisation are not to make profit; its funds will only be used to achieve its objects; and its income, profits, surplus and property (whether or not generated from operating hotels or guesthouses) will not be distributed among its members, organisation owners, shareholders, etc.  Non-profit-making societies should also keep sufficient records of income and expenditure (including donation receipts), proper accounting books and compilation of annual financial statements for review by the IRD when necessary.  It is worth noting that non-profit-making societies are not necessarily charitable bodies.  Unless exempted under section 88 of the IRO, such societies do not have tax-exempt status under the IRO.

Apart from the number of guesthouse licences, the IRD will also take into consideration the actual operation of the guesthouse and whether it operates one or more businesses.

In simple terms, all guesthouse licensed premises under the same business registration will be regarded as the place of business of the same business. If the licensee applies for business registration separately for different licensed premises, the business at each premises will be regarded as a separate business. If there is less than 10 rooms for lodging guests at each premises, the related accommodation charge is exempted from HAT.

On the contrary, if the licensee applies for only one business registration for all premises, then the business operated at all premises will be regarded as the same business. Therefore, the business so operated has 10 or more rooms available for lodging guests. All related accommodation charges will not be exempted from HAT.

HAT is levied at the rate of 3% on accommodation charges, which are the sum payable by or on behalf of a guest for the accommodation received (irrespective of whether the charges are calculated on a daily or hourly basis). Service charges are exempted from HAT. Please refer to Q2 for more details.

Example

If the room rate and service charge are $1,000 and $100 respectively, HAT is $30 (i.e. $1,000 × 3% = $30)

Out of the three hotel room nights, only the accommodation charge for the two nights on 1 and 2 January 2025 is chargeable to HAT. Taking the accommodation charge of a room is $1,000 per night as an example, HAT is $60 (i.e. $1,000 × 2 × 3%).

In general, unless specifically exempted, HAT is charged on all hotels, guesthouses or service apartments falling within the meaning of “hotel” under the Hotel Accommodation Tax Ordinance when rooms are provided to guests. For a service apartment which is clearly not accommodation provided to a “guest” (e.g. a service apartment that is not provided as a sleeping accommodation, which is excluded from the application of the Hotel and Guesthouse Accommodation Ordinance (Cap. 349)), the IRD generally accepts that it is excluded from the charge of HAT. However, the service apartment, guesthouse or hotel is required to keep sufficient records to reflect its mode of operation or the accommodation details of the guests.

For an occupant staying in the same hotel for 28 consecutive nights or more (even if there is a room change), the case will be regarded as long-term accommodation. If the hotel provides both short-term and long-term accommodation, the accommodation charges for long-term accommodation are not subject to HAT. Hotels must keep the accommodation information and records of the occupants for at least 6 years for future inspection by the IRD.

The hotel is not required to designate individual floors or rooms for long-term accommodation or notify the IRD of the long-term accommodation arrangements in advance. However, the hotel must keep the long-term accommodation occupancy information and relevant supporting documents, including but not limited to the signed tenancy agreements (if any), rental receipts, proof of stay etc., for at least 6 years for future inspection by the IRD.

HAT is not chargeable so long as the occupant stays in the same hotel for 28 consecutive nights or more and the stay is regarded as long-term accommodation. The occupant can change room during the period of stay.

So long as the occupant stays in the same hotel for 28 consecutive nights or more, the stay will be regarded as long-term accommodation, and the relevant accommodation charge will not be subject to HAT. The HAT paid by the occupant during the initial stay can be handled by the hotel itself.

The hotel can make adjustment in the return submitted to the IRD in the next quarter and deduct that HAT already paid.

Regardless of when an occupant checks in the hotel, so long as the occupant stays in the same hotel for 28 consecutive nights or more, the stay will be regarded as long-term accommodation, and the relevant accommodation charge will not be subject to HAT.

If an occupant and a hotel make an agreement that the occupant will stay in the hotel for 28 consecutive nights or more, but due to force majeure, the hotel has to arrange the occupant to change to another hotel to continue the accommodation, the occupant will be regarded as if he/she had never changed hotel and the related accommodation charges will not be subject to HAT.

If a guest books a hotel room through a travel agent (including an OTA), HAT shall be calculated solely based on the room rate provided by the hotel to the travel agent. For example, if the room rate provided by the hotel to the travel agent is $1,000, irrespective of the any other charges or discount to be included in the price displayed by the travel agent, HAT shall be calculated based on $1,000, i.e. $1,000 × 3% = $30.

HAT shall be calculated based on the room rate provided by the hotel to the OTA. The hotel should make adjustments accordingly when accounting for the transactions.

HAT shall be calculated based on the room rate provided by the hotel to the OTA. The changes in the room rates provided by OTA will not affect the computation of HAT.

Apart from those items agreed between the hotel and OTA, the booking statement should clearly show the accommodation charge (room rate) provided by the hotel and the amount of HAT collected. For the purpose of computing HAT, a discount (if any) agreed by the hotel is deductible from the room rate and the revised room rate should be used for calculation of HAT. However, a discount offered by the OTA for its own business purposes is a non-deductible item.

HAT should only be calculated based on the room rate provided to the OTA by the hotel. Thus, the base price of the room shall be taken as the accommodation charge and HAT shall be calculated based on the base price.

HAT should only be calculated based on the room rate provided to the first OTA by the hotel, which shall be taken as the accommodation charge.

Regardless of how the room is booked, the bill issued to the guest must state clearly the amount of HAT collected or that the total amount charged is inclusive of HAT for future inspection by the IRD. For example, if the bill issued by the hotel or the OTA does not show the individual charge items separately, a note must be added in the bill stating that the total amount charged includes HAT.

The hotel may collect the HAT from the guest direct upon check-in. The bill issued to the guest by the hotel must state clearly the amount of HAT collected or that the total amount charged is inclusive of HAT for future inspection by the IRD. If the bills issued by the hotel or the OTA do not show the individual charge items separately, a note must be added in the bill stating that the total amount charged includes HAT.

As the points or cash coupons have money’s worth which can be used as money, the equivalent value of the points or cash coupons is chargeable to HAT. For instance, if a guest pays the accommodation charge of $1,000 by cash of $900 and a cash coupon of $100, HAT is calculated based on $1,000.

If the accommodation is received by a guest through redemption of the points but the room rate is not specified, HAT will be calculated on the price of the accommodation of the same grade of room on the date of stay at the time of making the redemption. The hotel must keep all information about the price of the accommodation for future inspection by the IRD.

HAT is calculated based on the accommodation charge that is disclosed by the hotel when marketing its package deals. If the accommodation charge is not disclosed, HAT will be calculated by making reference to the price of the accommodation of the same grade of room on the dates of stay at the time of selling the package. The hotel must keep all information about the price of the accommodation for future inspection by the IRD.

The IRD will accept the average price of the accommodation of the same grade of room as a reference for calculating the accommodation charge.

If the price of the wedding package will not vary regardless of whether the guest accepts the hotel accommodation, the package will not be regarded as one for hiring hotel room, and the accommodation will not be subject to HAT.

The hotel needs to state clearly the amount of HAT collected or that the total amount charged is inclusive of HAT on the bills issued to guests to substantiate the basis for calculation of HAT for future inspection by the IRD.

If a guest does not show up to check-in, it means that the guest has not received accommodation. Under such circumstance, the hotel does not need to pay HAT. If a guest fails to pay the accommodation charge, the hotel does not need to pay HAT for the accommodation.

If a hotel enters into a contract with a product supplier or service provider whereby hotel accommodation is provided in return for the products or services provided by the supplier or provider, HAT will generally be levied on the contract price mutually agreed upon by the parties. If there is no mutually agreed price, HAT will be calculated on the price of the accommodation of the same grade of room on the date of stay at the time of making such contract or booking the room.

Depending on the circumstances of each case, if a hotel room is provided as complimentary accommodation to a KOL in return for the promotional services rendered by the KOL, such promotional services are considered as money’s worth equivalent to payment for the accommodation charge in money. Thus, the hotel proprietor is required to pay HAT for the accommodation.

If a contract is entered into with a KOL, whether in verbal or written form, HAT will be levied on the price of the accommodation specified in the contract. If the room rate is not specified in the contract, the price of the accommodation of the same grade of room on the date of stay at the time of making such contract or booking the room should be used for calculation of HAT instead.

The hotel must keep all information about the price of the accommodation for future inspection by the IRD.

Depending on the circumstances of each case, it will not be considered as an exchange for services with money’s worth since the guest has not rendered any services to the hotel. The hotel does not need to pay HAT in respect of the hotel room.

If hotel rooms are provided to its employees for short-term stays (e.g. under adverse weather conditions) or as staff quarters, although no HAT is chargeable, the hotel is still required to report the relevant information to IRD for record purposes. If the rooms are used as staff quarters, the information reported in an HAT return should include the room number, the period, the occupant’s name, and the related file number of the Employer’s Return. For short-term stays of its employee, the information reported should include the date of occupancy and the number of rooms involved. The hotel must keep all information about the usage of the accommodation for future inspection.

After the resumption of collection of HAT, the IRD will issue the first quarterly HAT returns to the managers of hotels or guesthouses on 2 January 2025. For subsequent quarters, the quarterly HAT returns will be issued on the first working day of April, July, October and January in each year in accordance with the Hotel Accommodation Tax Ordinance.

The managers of hotels or guesthouses should sign the quarterly HAT returns and send them to the IRD within 14 calendar days after the quarters ending on 31 March, 30 June, 30 September and 31 December in each year.

The hotel shall pay to the IRD, within 14 calendar days after 31 March, 30 June, 30 September and 31 December in each year, the amount of HAT payable in respect of the quarters ending on those dates.

The Hotel Accommodation Tax Ordinance does not empower the IRD to extend the deadline for submitting the quarterly HAT return.

A hotel proprietor may make the payment of HAT through the following methods:

Where necessary, tax inspectors of IRD will carry out inspections at hotels to check the accommodation charges paid by guests to ensure that the correct amount of HAT has been paid by the hotel proprietors. For this purpose, the records to be inspected by the tax inspectors include the guest register, the occupied rooms report, the guest ledger, and the daily room sales report. If the hotel has provided long-term accommodation, the tax inspectors may also inspect the relevant tenant agreements, proof of stay, rental receipts, etc.

The IRD may initiate prosecution in respect of late payment of HAT or late submission of quarterly HAT return. Upon summary conviction, the maximum fine is at level 4 (currently $25,000).