Resident Hotel Stays May Still Attract Turnover Tax

Dear Editor,

On July 17, the Tax Administration issued a statement clarifying that registered residents of St. Maarten are exempt from room tax when staying at local hotels, apartments and guesthouses. The clarification is welcome and correct.

Article 1 of the Logeergastenbelastingverordening limits the room tax to guests who are not registered in the civil registry. However, there is a second part of the issue that deserves equal attention.

Room tax and turnover tax are communicating vessels. Article 8, paragraph 16 of the Landsverordening belasting op bedrijfsomzetten exempts the rental of hotel rooms and apartments from turnover tax only if, and to the extent that, room tax has been paid on that revenue.

Revenue from resident guests falls outside the room tax. It therefore also falls outside the turnover tax exemption. The result is that the operator owes 5% turnover tax on the same revenue that the Tax Administration has declared exempt from room tax.

Room tax amounts to one twentieth of the room price, which is also 5%. The exemption therefore largely shifts the same 5% from one ordinance to another.

There is an important difference. Room tax is a direct tax on the guest, which the operator collects and remits. Turnover tax is imposed on the operator’s own revenue. A hotel that stops charging room tax to residents without adjusting its rates would therefore absorb the turnover tax itself.

Operators are left with practical questions. How should staycation packages be invoiced? What proof of residency must be retained for a future audit?

The Tax Administration has shown through its statement that it takes public education seriously. A follow-up clarification addressing the turnover tax implications of resident stays would complete the picture and provide useful guidance to the accommodation sector.

Marco Aalbers
www.aalbersprivatetaxadvisory.com

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