The Tourism Tax Bill and Airbnb

The recent passing of the Tourism Tax Bill was met with much concern from various tourism industry players and netizens. Essentially the tourism tax bill imposes a tax that is levied on tourists staying at any accommodation made available by an operator.

Hamzah Rahmat, the president of the Malaysian Association of Tour and Travel Agents (Matta) was concerned with the impact on local tourism and hoped the government could provide more details. Mr Cheah Swee Hee, the president of the Malaysian Association of Hotels (MAH), argued that the tourism tax would create an uneven playing field, driving local and foreign tourists to accomodations such as those offered through Airbnb and unlicensed hotels, which aren’t regulated by the law. And of course, netizens cried foul over the expected increase in prices.

While unlicensed hotels are effectively illegal and should be shut down anyway, Airbnb services are a different kettle of fish.

The Government had acknowledged back in 2016 that the Airbnb service was legal, effectively endorsing the service, while also stating that there were no plans to issue licenses to the operators. However, even without a license, the nature of the services makes it clear that they should fall under the tourism tax bill just like hotels and should be taxed accordingly.

A few things need sorting out though, for instance, what’s the rate that should be applied to Airbnb services?

The Tourism Tax Bill did not lay out in detail the rates to be charged for traditional hotels, but according to a briefing held between the authorities and the Malaysian Association of Hotels, the tax rates to be applied per night will differ based on a hotel’s star rating as follows:

Unrated hotels: RM2.50
Two-star hotels: RM5
Three-star: RM10
Four-star: RM15
Five-star and above: RM20

If this is the case, how does this work for Airbnb then?

In theory, Airbnb accommodations are not maintained professionally. It would seem logical that the lowest tier, RM2.50 for non-rated hotels, should be applied. It doesn’t seem realistic to use the user rating reviews, regardless of how it’s done.

On the other hand, there are a wide range of options available under Airbnb, from cheap simple rooms in shared apartments to expensive high-rise suites. Charging the lowest tier for an expensive suite doesn’t make sense either.

A case could be made for having multi-tier rates, just like for hotels, but using price as the determinant. The higher the price, the higher the rate. Determining the tiers might not be so simple though, and is bound to face even more opposition.

Another issue is the method of collection although the solution might be more straightforward then one might think. Airbnb actually does collect tax in certain countries it operates in and remits them to the respective governments. In most cases, the tax collected is calculated from the listed price plus any cleaning fee imposed.

America, France, India, Netherlands and Portugal are some of the countries where Airbnb collects tax and remits the tax back to the governments on behalf of their hosts.

However, this could also mean having to provide Airbnb with personal tax information, something individual hosts here might be reluctant to do.

The other alternative of course would be for the hosts to remit it themselves, but let’s face it, some of these hosts aren’t even declaring their Airbnb income for income tax purposes, never mind having to remit a new tax altogether. It is yet another example of potential tax revenue falling through the gaps that the Government needs to address.

While there are other issues to consider as well, the overwhelming majority in Parliament that voted in the law is a clear indication that the Tourism Tax is here to stay. How the Government implements it will be scrutinised in the coming months, especially for the non-traditional industry players such as Airbnb. Ultimately, the Government still needs to widen its revenue base, and this is another indirect tax avenue to do so.


Azmin Mohd Khalib
Senior Editor
Wolters Kluwer Malaysia