China VAT

Effective from 1 May 2016, the majority of services provided by hotels in China, including the room charge, will be subject to a uniform 6% VAT rate; however different VAT rates may apply to different services or goods provided by hotels. Prior to this announcement, most hotels in China charged guests a 15% “service charge” consisting of a 10% service charge and a 5% business tax. This new policy transforms the business tax of 5% to a VAT of 6%. As a result, travelers should expect the service charge should now be 16 percent. Some hotel policies, however, have been to simply add the 6% VAT onto the previous service charge, creating a 21% charge.