Tax changes affecting the hotel industry have been passed by Parliament as part of the Government’s recent budgetary reforms.
The changes, many of which were made as a condition for the €20 billion IMF/EU support package, include:
- an 18% preferential VAT rate for hotel services, effective from the day after the legislation is published in the Official Gazette (ie in a few days from now). Other services provided by hotels (such as wellness or catering) will be taxed at the standard 25% rate
- an individual’s gross income plus his employer’s contributions will constitute his personal income tax base from 2010 onwards (“supergross”)
- service charges and tips will be subject to essentially the same personal income tax liability as income from employment
- employers will benefit from a 5% decrease of employer’s social security contribution on all salaries from 1 January 2010
- the itemised healthcare contribution is being abolished from 1 January 2010
- from 2010, most fringe benefits which are currently tax-exempt (eg travel vouchers) will be taxed at 25% (subject to certain upper limits in value). As this tax is payable by the employer, some might be forced to restructure their cafeteria systems to avoid the extra tax burden
- from 2010, corporate income tax rate will increase from 16% to 19% and the 4% solidarity tax will be abolished
