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Tourism Tax – Greeting the Tourism Tax Bill 2017

April 2017

by Karen Cheah Yee Lynn


The Tourism Tax Bill 2017 seeks to impose tax on tourists in Malaysia through operators of “accommodation premises” such as hotels, inns, hostels, lodging houses, on behalf of the Director General of Customs and Excise (“Director General”).

The Bill was tabled at Parliament for its first reading before the Dewan Rakyat (House of Representatives) on 4.4.2017 by Minister of Tourism and Culture Dato’ Seri Nazri Abdul Aziz (BN- Padang Rengas), and passed the following day. The Right Honourable Member from Padang Rengas expressed in Hansard that the Bill aims to be “The catalyst for economic growth in line with the increase in the contribution of this sector to the national economy”.1 This piece of legislation received its assent from the Dewan Negara (Senate), but what remains uncertain is the taxable rate as the Finance Minister has yet to propose the rate of tourism tax applicable and the Bill leaves this part to be fixed by the Minister by way of gazette and announcement later.

The scope of “accommodation premises” has been defined in the Bill as “any building, including hostels, hotels, inns, boarding-houses, rest houses and lodging houses, held out by the proprietor, owner or manager, either wholly or partly, as offering lodging or sleeping accommodation to tourists for hire or any other form of reward, whether or not food or drink is also offered.” In the event there are multiple guests in a single room, only 1 of the tourists shall be liable to pay the tax. Put simply, the tax imposed is charged based on the number of rooms instead of the number of occupants.

Dato’ Nazri during the reading of this Bill in Parliament,2 gave examples that the possible taxable rate could be as follows:

  • 5 star hotel (accommodation): RM20 per night
  • 4 star hotel (accommodation): RM10 per night
  • 1 – 3 star hotel (accommodation): RM5 per night
  • Orchid” rated or non-rated hotel (accommodation): RM2.50 per night

The Bill lays out exemptions to tourism tax and empowers the Minister by order, to exempt any tourist or class of tourists from the whole of any part of the tax; or that the Minister may exempt any person from all or any provisions of the Act (Bill) itself.

According to the Tourism Minister during the parliamentary debate, the former category may be applicable whenever an application is made by an accommodation premise which is hosting non-commercial events, such as international or religious conventions.3 The Minister may further consider to reduce or to exempt the occupants who are attending those events from these taxes. There are 4 instances, where tourism tax would not be imposed:4

  • Accommodation premises offering/conducting home-stay programme registered under the Ministry of Tourism and Culture;
  • Accommodation premises offering/conducting kampung-stay programme registered under Ministry of Tourism and Culture;
  • Accommodation premises solely meant for educational and non-commercial institutions or trainings; and
  • Accommodation premises solely meant for religious and non-commercial institutions.


A. Adminstrative and Enforcement issues

The Bill states that every operator shall register themselves with the Director General within 30 days from the date of operation. As for operators operating accommodation premises before the commencement of this Act (Bill), the Bill makes it obligatory for operators to register themselves within 30 days from the date of coming into operation of Part 4: Registration of the Act (Bill), failing which is an offence and can be punished with a fine not exceeding RM30,000, or imprisonment for a term not exceeding 1 year or both.

Additionally, an operator shall, upon issuance of invoice or receipt in respect of accommodation provided, state clearly the rate and amount of tourism tax payable separately from the charges of accommodation. Quite apart from that, operators shall also be legally obliged to keep full, true and up to date records of all transactions related to the liability to collect tourism tax for 7 years, failing which is an offence subject to a fine not exceeding RM30,000.00, or imprisonment for a term not exceeding 1 year.

This tourism tax is taxable periodically at 3 months intervals or alternatively, if the operator has been assigned with a taxable period for purposes of GST, the taxable period for tourism tax shall be the same as the one allocated for GST returns. If any tourism tax is not paid when it is due and no prosecution is instituted, then the operator shall be liable to pay a penalty of:

  • Day 1 – 30: 10% of the amount of tourism tax remaining unpaid;
  • Day 31 – 60: Additional 10% of the amount of tourism tax remaining unpaid; and
  • Day 61 – 90: Additional penalty of 10% of the amount of tourism tax remaining unpaid.
  • If the tourism tax remains unpaid after 90 days, prosecutor could then initiate action against the operator for the sum and penalties payable.

Furthermore, to compel payment from a person, the Bill empowers the Director General to issue to the Director of Immigration a certificate containing particulars of the sum related to the said tourism tax so as to prevent the person from leaving Malaysia unless and until the tourism tax amount due has been paid and cleared.

A senior officer of customs shall have all powers of a police office of whatever rank as provided under Criminal Procedure Code in relation to enforcement, inspection and investigation. Under such power, any senior officer may enter into any accommodation premises to examine, seize and detain any book, data, document or other records relevant for enforcement purposes.


B. Concluding remarks

According to Hansard,5 the Right Honourable Member Dato’ Seri Mohamed Nazri Abdul Aziz submitted to the Parliament that the occupancy rates of accommodation premises in Malaysia is in the region of 60%, thereby possibly generating revenue of RM654,515,000 and this amount could even escalate to RM872,820.120 should occupancy rates rise to 80%.

The rationale for implementing tourism taxes has been explained as to generate expansion of the tourism industry, so as to attract more visitors to Malaysia. Other tourism tax imposing countries include Japan, India, Italy and Thailand. The general public would need to wait and see whether the imposition of tourism tax on tourists will create a more robust tourism environment within the country. It would be interesting to see if a rise in costs of staying in a hotel would affect the domestic tourism market.

Another important concern is the issue of taxing unlicensed accommodation premises, or any other relevant premises provided for in the online marketplace and hospitality services such as Airbnb and others. It remains to be seen whether the implementation of this tourism tax may cause business fatigue of hoteliers of having to implement another new form of tax, especially after having just implemented the regulations with respect to the GST, or create a vital boost to the lucrative tourism industry.

This material is for general information only and is not intended to provide legal advice. If you have any queries regarding the above, please feel free to contact us at

1[i] Hansard 5 April 2017, vol 19, p.220

2[ii] ibid, p. 249

3[iii] ibid, p. 256

4[iv] ibid, p. 249

5[v] ibid, p. 246