Welcoming long-stay guests is a fantastic way to maintain steady occupancy at your property. Under the South African Value-Added Tax (VAT) Act, guests who book extended stays qualify for a special tax allowance that reduces their total bill—without reducing your property's revenue.
Here is a simple, straightforward guide to how long-stay VAT calculations work, which charges qualify, and how to apply the calculation to your guest accounts.
How VAT is calculated for long-stay bookings
Welcoming long-stay guests is a fantastic way to maintain steady occupancy at your property. Under the South African Value-Added Tax (VAT) Act, guests who book extended stays qualify for a special tax allowance that reduces their total bill—without reducing your property's revenue.
Here is a simple, straightforward guide to how long-stay VAT calculations work, which charges qualify, and how to apply the calculation to your guest accounts
The special VAT calculation applies to the all-inclusive tariff for the booking. This includes the accommodation charge as well as any domestic goods and services supplied alongside it.
What are domestic goods and services
The Act sees 'any domestic goods and services' as:
- cleaning and maintenance
- electricity, gas
- air conditioning or heating
- a telephone
- television set
- radio or other similar article
- furniture and other fittings
- meals
- laundry
- nursing services
- water
when supplied together with commercial accommodation.
Understanding the calculation
The long-stay guest VAT benefit is essentially:
- SARS claiming less VAT for the longer stay
- reducing the total bill cost for the guest.
The guest pay less VAT (effectively 9% instead of 15%), so their total bill is cheaper, making long-term stays more affordable.
Even though the bill is reduced, the property earns the same revenue since the benefit to the guest is deducted from the VAT portion of the total bill.
Properties become more competitive for long-term stays. They can market reduced VAT-inclusive pricing for extended guests, which can attract longer bookings.
- In this invoice example the VAT is charged at 15%
This calculation is 24 000 x (15/115) = 3130.43
Since the guest has stayed for 30 nights, the long-stay VAT benefit should be applied.
The correct calculation for the long-stay VAT would be:
- 24 000 x (9/109) = 1981.65
Now that we have the correct VAT amount, let's calculate the VAT benefit the guest should receive.
This would be the difference between the standard VAT and the long-stay VAT amounts:
- 3130.43 - 1981.65 = 1148.78
The VAT benefit amount is what the invoice total should be reduced by.
Information from SARS
The South African Revenue Service (SARS) has a detailed and informative document, 'VAT 411 - Guide for Entertainment, Accommodation and Catering'.
- It outlines all the specifics and provides examples along with mock calculations as guidance.
Feel free to access it via the the SARS website or simply download from the link below.
