Official Dispatch 3952TC/TCT 1999 guidance on service charges in the tourism industry

Service charges in the tourism industry are tips given to businesses of tourism and hotel service for good service quality. They also reflect the satisfaction and goodwill of the guests towards the service attitude of service staff. These charges have become an international practice.

To ensure that the collection and use of service charges in the tourism industry effectively act as an economic leverage, encouraging staff to improve service quality, enhance the efficiency of business, and fulfill tax obligations to the State Budget, at the proposal of the General Department of Tourism in Official Dispatch No. 498/TCDL-KHDT of May 10, 1999, regarding the continuation of service charge collection in the tourism industry, the Ministry of Finance provides the guidance on collecting and using service charges as follows:

1. Conditions and scope of service charge collection:

a) Conditions: Units in the tourism industry engaging in activities such as travel, transportation of guests, hotels, entertainment, etc., are eligible to collect and use service charges if they meet the following conditions:

- Good service quality that satisfies guests, leading them to voluntarily tip beyond the service price.

- Publicly listed prices.

- Clear accounting of additional guest tips.

b) Scope of application: Tourism business units shall be allowed to collect service charges on the following services:

- Room rental,

- Food and beverage services,

- Vehicle rental with service staff,

- Services such as laundry, tailoring, hairdressing, beauty treatment, etc.

- Sauna

- Travel guidance, entertainment organization.

- Other services.

2. Charge rates of service: Tourism business units meeting the conditions in point (a) are permitted to collect a service charge of no more than 5% on the sales price of the services specified in point (b).
3. Use of service charges:

+ From January 1, 1999, the VAT Law came into effect. Tourism business units collecting service charges must pay VAT and corporate income tax (after deducting expenses incurred to generate this income) according to current regulations. After paying these taxes, the service charges are distributed as follows:

+ Allocated for rewarding individuals and groups with good service quality, for study tours to improve professional skills, and for improving working conditions, but not exceeding 50% of the actual salary fund. This expense is not counted towards the bonus and welfare fund limits and is not included in the taxable additional income of the business.

+ The remaining amount (if any) is allocated to the business funds. Particularly for loss-making businesses, service charges are not deducted and used as prescribed above but are accounted together with income to reduce losses.

4. Management task:

Tourism business units must organize and strictly manage the collection and use of service charges, collect the correct rates within the defined scope, effectively use the funds, and account according to the State regulations.

The General Department of Tourism is requested to provide units with the guidance of implementation in compliance with the content of this dispatch. Units shall re-organize the recording of invoices and payments with guests, ensuring that service charges are recorded in a separate section for ease of monitoring and management.