Tourism & Hospitality VAT: Real Examples and Calculations for Hotels & Restaurants
Master tourism and hospitality VAT with real examples! Learn exactly how to calculate VAT for hotels, restaurants, and travel services with actual transaction scenarios.
Tourism & Hospitality VAT: Real Examples and Calculations for Hotels & Restaurants
Tourism and hospitality VAT mistakes can cost hotels and restaurants thousands of dirhams. This practical guide shows you exactly how to calculate VAT for different hospitality services with real examples you can apply immediately.
Example 1: Hotel Services VAT Calculation
Scenario: 5-Star Hotel Services
Room Rate: AED 800 per night
Restaurant Services: AED 300 per day
Spa Services: AED 500 per day
Service Charge: AED 100 per day
VAT Calculations:
- Room Rate: AED 800 × 5% = AED 40 VAT
- Restaurant: AED 300 × 5% = AED 15 VAT
- Spa Services: AED 500 × 5% = AED 25 VAT
- Service Charge: AED 100 × 5% = AED 5 VAT
Total VAT: AED 40 + AED 15 + AED 25 + AED 5 = AED 85
Guest Pays: AED 1,700 + AED 85 = AED 1,785
💡 Key Point: All hotel services attract 5% VAT
Example 2: Restaurant Services VAT Calculation
Scenario: Fine Dining Restaurant
Dining Services: AED 500 per table
Takeaway Services: AED 200 per order
Catering Services: AED 2,000 per event
Delivery Charges: AED 30 per delivery
VAT Calculations:
- Dining: AED 500 × 5% = AED 25 VAT
- Takeaway: AED 200 × 5% = AED 10 VAT
- Catering: AED 2,000 × 5% = AED 100 VAT
- Delivery: AED 30 × 5% = AED 1.50 VAT
Total VAT: AED 25 + AED 10 + AED 100 + AED 1.50 = AED 136.50
Customer Pays: AED 2,730 + AED 136.50 = AED 2,866.50
💡 Key Point: All restaurant services attract 5% VAT
Example 3: Travel Services VAT Calculation
Scenario: Travel Agency Services
International Flight: AED 3,000 (zero-rated)
Domestic Flight: AED 800
Hotel Package: AED 2,500
Travel Insurance: AED 200 (exempt)
VAT Calculations:
- International Flight: AED 3,000 × 0% = AED 0 VAT (zero-rated)
- Domestic Flight: AED 800 × 5% = AED 40 VAT
- Hotel Package: AED 2,500 × 5% = AED 125 VAT
- Travel Insurance: AED 200 × 0% = AED 0 VAT (exempt)
Total VAT: AED 0 + AED 40 + AED 125 + AED 0 = AED 165
Client Pays: AED 6,500 + AED 165 = AED 6,665
💡 Key Point: International flights are zero-rated, domestic services attract VAT
Example 4: Tourism Activities VAT Calculation
Scenario: Tourism Company Services
Desert Safari Tour: AED 400 per person
City Tour: AED 300 per person
Adventure Activities: AED 600 per person
Cultural Experience: AED 250 per person
VAT Calculations:
- Desert Safari: AED 400 × 5% = AED 20 VAT
- City Tour: AED 300 × 5% = AED 15 VAT
- Adventure: AED 600 × 5% = AED 30 VAT
- Cultural: AED 250 × 5% = AED 12.50 VAT
Total VAT: AED 20 + AED 15 + AED 30 + AED 12.50 = AED 77.50
Tourist Pays: AED 1,550 + AED 77.50 = AED 1,627.50
💡 Key Point: All tourism activities attract 5% VAT
Example 5: Hotel Equipment and Supplies VAT
Scenario: Hotel Equipment Purchase
Hotel Furniture: AED 50,000
Kitchen Equipment: AED 30,000
IT Systems: AED 20,000
Food Supplies: AED 10,000
VAT Calculations:
- Furniture: AED 50,000 × 5% = AED 2,500 VAT
- Kitchen Equipment: AED 30,000 × 5% = AED 1,500 VAT
- IT Systems: AED 20,000 × 5% = AED 1,000 VAT
- Food Supplies: AED 10,000 × 5% = AED 500 VAT
Total VAT: AED 2,500 + AED 1,500 + AED 1,000 + AED 500 = AED 5,500
Hotel Pays: AED 110,000 + AED 5,500 = AED 115,500
💡 Key Point: All hotel equipment and supplies attract 5% VAT
Tourism & Hospitality VAT Scenarios
Example: Annual Hotel VAT Calculation
Annual Services:
- Room revenue: AED 2,000,000 + AED 100,000 VAT
- Restaurant revenue: AED 800,000 + AED 40,000 VAT
- Spa services: AED 400,000 + AED 20,000 VAT
- Additional services: AED 200,000 + AED 10,000 VAT
Total VAT Collected: AED 170,000
Input VAT (expenses): AED 80,000
Net VAT to Pay: AED 90,000
💡 Key Point: All hospitality services attract VAT, creating significant liability
Common Tourism & Hospitality VAT Mistakes
❌ Mistake 1: Not Charging VAT on Service Charges
Wrong: Not charging VAT on hotel service charges
Correct: Service charges attract 5% VAT
❌ Mistake 2: Incorrect Travel Service Classification
Wrong: Charging VAT on international flights
Correct: International flights are zero-rated
❌ Mistake 3: Not Charging VAT on Takeaway Services
Wrong: Not charging VAT on takeaway orders
Correct: Takeaway services attract 5% VAT
Tourism & Hospitality VAT Checklist
- ✅ Hotel room rates: 5% VAT
- ✅ Restaurant services: 5% VAT
- ✅ Spa and entertainment: 5% VAT
- ✅ Service charges: 5% VAT
- ✅ Takeaway services: 5% VAT
- ✅ Catering services: 5% VAT
- ✅ Domestic travel: 5% VAT
- ✅ International flights: Zero-rated
- ✅ Travel insurance: Exempt
- ✅ Tourism activities: 5% VAT
Real Business Impact
Example: Annual Tourism Company VAT Impact
Annual Operations:
- International flights: AED 1,500,000 (zero-rated)
- Domestic services: AED 800,000 + AED 40,000 VAT
- Hotel packages: AED 1,200,000 + AED 60,000 VAT
- Tourism activities: AED 500,000 + AED 25,000 VAT
Total VAT Collected: AED 125,000
Input VAT (expenses): AED 60,000
Net VAT to Pay: AED 65,000
💡 Impact: AED 65,000 VAT liability despite international flights being zero-rated!
When to Seek Professional Help
- Complex package deals
- International travel arrangements
- Mixed service offerings
- Seasonal pricing strategies
- Audit or investigation
Conclusion
Tourism and hospitality VAT can be complex, but understanding the correct treatment for each service type is crucial for compliance and optimizing your tax position.
Need help with tourism and hospitality VAT? Our expert team can review your services, ensure correct VAT treatment, and optimize your tax position. Contact us today for professional tourism VAT support.