Belize Service Charge Now Subject to Business Tax!
The Income Tax Department has recently made a ruling that all service charge collected by the Hotels/Resorts are now subject to business tax. This ruling is retroactive and if it is determined that during an income tax audit that service charge was previously collected and not paid, and assessment will be raised for the corresponding business tax in addition to interest and penalties.
Most hotels/resorts do not benefit financially from collecting the service charge and periodically all that is collected is eventually distributed to their employees and form a part of their total emoluments (subject to income tax p.a.y.e.). As such, service charge might be deemed conduit funds, which to the best of my knowledge is not subject to business tax.
This is supported by Section 2 and Section 16 (1) of the Hotels and Tourist Accommodations Act which states:
“service charge” means any money or other thing of value collected or received from a guest or customer of any hotel, tourist accommodation building, restaurant, cafe, nightclub or other place of entertainment or hospitality, which is excess of the basic contractual liability of that guest or customer and is, or is purported to be, collected or received in respect of the quality of service afforded to that guest or customer, and without prejudice to the generality of the foregoing, includes any sum, whether calculated on the basis of a fixed percentage or otherwise, levied on the amount charged to such guest or customer and expressed to be in respect of service;"
16.-(1) Any service charges collected or received by a proprietor or employer from guests or customers shall be distributed among employees in accordance with the provisions of a scheme prescribed or registered under the provisions of this section, and in the absence of any such scheme, by agreement with the employees.
As such, Tourism related interest, Resorts/Hotels are encouraged to include the service charge collected in their business tax calculation.