China is making some changes to how they structure their taxes, including for hotel stays. These changes could very well cause your next hotel stay in China to be significantly more expensive.
Under the current system, most hotels in China charge guests a 15% “service charge.” In practice the “service charge” is made up of a 10% service charge and a 5% business tax, which they simply display as one amount to make things easier.
As of May 1, 2016, China is changing how they tax hotel stays. Rather than charging a business tax, China will instead be charging a VAT (value added tax) for hotel stays. KPMG has an explanation of how the tax system is changing, for anyone who wants to learn more.
What’s interesting is how the hotels are taking advantage of this change to charge you more, at least from the looks of it. If you pull up any Starwood hotel in China, you’ll see an announcement stating the following:
VAT Change Effective May 1, 2016
Value added tax (VAT) will be implemented in China as of 1 May 2016, and the room charge and charges for other hotel services will be subject to VAT if VAT is in effect at the time such charges are charged.
While the business tax was previously 5%, the new VAT is 6%. So you should be paying just 1% more, right? Wrong, unfortunately.
It seems like hotels are planning on keeping the 15% service charge (which included the 5% business tax), and then tacking on the 6% VAT on top of that. The VAT even applies to the service charge, meaning that starting in May consumers will pay 6.9% more for hotel stays in China.
Take the Park Hyatt Shanghai, for example, where the rate is 1700CNY. I’ve pulled up the rate for random dates before and after May 1.
Before May 1 the total for such a stay would be 1955CNY, which reflects the 15% “service charge.”
Meanwhile after May 1, the total would be 2072.30CNY, reflecting the 15% “service charge” and cumulative 6.9% VAT.
I’m assuming this is intentional on the part of hotels, in which case this is very disappointing. While Hyatt’s rates already reflect the new tax, Starwood hasn’t yet updated their reservations system to reflect the increase, though they have posted notices on their site.
Bottom line
China is changing how they’re structuring taxes, including for hotels. Unfortunately it seems like hotels are taking advantage of this to gouge consumers even more. We should see the “service charge” lowered to 10%, in which case we’d just be looking at a cost increase of less than 2%. I hope hotels reconsider.
(Tip of the hat to LoyaltyLobby)
@brian, yes the title is misleading, but don't you generally read the article first and use your brain before you post the comment? China is just restructuring its tax system, not adding to it. It is some hotel chains like Hyatt (which is American I suppose?) that exploits this change and tries to charge its guests more. But good to know you are not travelling to China anyway, as you might otherwise be another example...
@brian, yes the title is misleading, but don't you generally read the article first and use your brain before you post the comment? China is just restructuring its tax system, not adding to it. It is some hotel chains like Hyatt (which is American I suppose?) that exploits this change and tries to charge its guests more. But good to know you are not travelling to China anyway, as you might otherwise be another example of ill-mannered foreigners to the Chinese people!
Their economy is tilting to a downward spiral...so just tax any visitors and business travelers more. I've seen the sites of China and the people there were generally shitty to deal with, even when using basic Mandarin. All they did was add yet another item into the "reasons never to travel to china again" column. The only plus they've had was the visa change(s) to be much more lenient...but I guess that was to get tax the travelers even more.
I wrote to somebody at Hyatt/GP to ask about this. Let's hope it's something they will correct now that we've brought it to their attention.
-David
Ok folks… 99% of these blogs for travel hackers (View Fron the Wing, Milevalue, etc..) talk about business class, first class, and staying in expensive hotels. Could ONE of you please help we "commons" who travel in "cattle class" and stay in $25/night hostels ?!?!? Thanks.
@ peter S
Chris b doesn't say why he doesn't want to go to China. So I will.
China is also not on my travel list. I have no desire to support the repressive regime that runs it, nor do I wish to have my internet access censored, etc. I don't need to visit China to know that these things are happening.
My mother left China in the 1970s and came here to Sweden to...
@ peter S
Chris b doesn't say why he doesn't want to go to China. So I will.
China is also not on my travel list. I have no desire to support the repressive regime that runs it, nor do I wish to have my internet access censored, etc. I don't need to visit China to know that these things are happening.
My mother left China in the 1970s and came here to Sweden to live a better life. She also has no desire to return if the country stays on its current path.
I'm sure that most Chinese people are lovely, hospitable, and so on. But I'll have to interact with them outside of China, thank you.
@Chris B,
You are an idiot for making that remark especially since you have never been to China. China is the second economic powerhouse in the world. It is one of the oldest civilization in the world. Land size is just about the size of the USA. It is also one of the safest country to travel in the world. Regardless what your stereotype about China or the Chinese government, to make that statement without...
@Chris B,
You are an idiot for making that remark especially since you have never been to China. China is the second economic powerhouse in the world. It is one of the oldest civilization in the world. Land size is just about the size of the USA. It is also one of the safest country to travel in the world. Regardless what your stereotype about China or the Chinese government, to make that statement without visiting the country or seeing what it has to offer just to show that you don't have an open mind. You also have absolutely no idea what you are talking about.
Who gives a darn anyway! China is not on or will it ever be on my travel list...
Chinese means of China.
Chinese cities. Chinese people. Chinese food. Chinese hotels.
Cities of China. People of China. Food of China. Hotels of China.
Context and intent are important things to consider when reading... often more so than recognizing an opportunity to take offense.
@ShiFu
Nobody gives back the VAT on hotels or restaurants. The whole idea of VAT refunds is that they're for goods exported from the country. Things consumed "in country" are never refunded.
@ Tee - "Using fewer words in writing is generally better, especially in headlines" Unless it's inaccurate. Paraphrasing Einstein, use as few words as possible, but not fewer. To me, "Chinese hotels" means those owned/run by the Chinese, not "American chain hotels in China." If you say "German hotels" or "French hotels," Hyatt won't jump to mind. In this article, wouldn't it be more accurate to say "SPG/Hyatt in China?" One more word, but changes...
@ Tee - "Using fewer words in writing is generally better, especially in headlines" Unless it's inaccurate. Paraphrasing Einstein, use as few words as possible, but not fewer. To me, "Chinese hotels" means those owned/run by the Chinese, not "American chain hotels in China." If you say "German hotels" or "French hotels," Hyatt won't jump to mind. In this article, wouldn't it be more accurate to say "SPG/Hyatt in China?" One more word, but changes the meaning entirely.
@ Tee - "Worldly blog"? You must have missed the guy ranting about Nazis. He was hardly the only idiot here.
Chinese hotels is a shorter way of saying hotels in China. Using fewer words in writing is generally better, especially in headlines. Dialing back the oversensitivity when reading a worldly blog is also generally better.
Do we get the VAT back at the airport when leaving the country as non-Chinese residents/citizens like in other countries?
How about "resort fee" here in the US? , which is of no use. So everyone has their own way of gouging more money. It's becoming the way of business nowadays.
Sneaky Asians...
Why a "service charge" at all? Although I don't like the increase in the total, it seems a bit more "honest" to list the tax separately. At least then you see what is really a tax, and what is just a nonsense add on. Service fee sounds like Chinese for resort fee.
Shouldn't the title read, "The Sneaky Way HOTELS IN CHINA are Charging More Starting in May"? Or are Starwood and Hyatt suddenly Chinese owned? It may be just a choice of words, but there's enough China bashing and general anti-Asian sentiment from readers here to justify being a little more careful in your wording.