In the 2022/2023 Budget Communication presented by The Right Honourable Prime Minister, Philip Davis K.C., M.P., the Government communicated its intention to introduce a new tax which will affect high end properties in a hotel rental pool, meaning any properties not owned by a hotel that form part of a hotel’s bedroom inventory under a rental management agreement. This new tax, the Condo-Hotel Tax, is reflected in the Hotels (Amendment) Act, 2022 and is in effect as of 31 January 2023.
Condo-Hotel Tax
- Properties that are part of hotel rental pools previously enjoyed exemption from payment of real property tax under the Hotels Encouragement Act, as there was the expectation that VAT would be generated from the rental of these properties and paid to the government.
- The Condo-Hotel Tax imposes a minimum tax fee if these properties do not generate Net VAT revenue from rentals equivalent to 75% of the real property tax on the value of the property.
- Net VAT is calculated as follows:
- Output VAT – Input VAT = Net VAT
- Output VAT is the VAT collected from the rental of the property;
- Input VAT is the VAT paid by a condo-hotel that is apportioned to a property on the proportion of rentals for that unit.
- The Condo-Hotel Tax will not be imposed if the Net VAT collected exceeds the Condo-Hotel Tax applicable.
Condo-Hotel Tax Rate
- The Condo-Hotel Tax is chargeable at 75% of the rate of tax applicable to residential property under the Real Property Tax Act which currently stands at 0.625% of the value of the property as assessed by the Chief Valuation Officer.
- The maximum annual Condo-Hotel Tax is $150,000.00.
Condo-Hotel Tax Due Date
- Condo-Hotel Taxes are due 31 January of each year.
- For the year 2022, the Condo-Hotel Tax will be charged for the period of 1 July – 31 December, 2022. Payment of 2022 Condo-Hotel Taxes is due on 31 March 2023.
Liability of Property Owners & Hotel Administrators
- Both Hotel Administrators and Property Owners are jointly and severally liable for the payment of the Condo-Hotel Tax. Additionally, payment of the Condo-Hotel Tax will be a condition for the renewal of the hotel’s licence to operate.
- It is the government’s intention to propose legislation in the 2023/2024 fiscal year, to empower Hotel Administrators to recover the Condo-Hotel Tax from unit owners.
For more information, you can contact a member of the Real Estate & Development practice group.
The information contained in this bulletin is provided for the general interest of our readers, but is not intended to constitute legal advice. Clients and the general public are encouraged to seek specific advice on matters of concern. This article can in no way serve as a substitute in such cases.
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