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Russia lowers VAT for hotels to zero

Russian Aeroflot resumes Warsaw passenger flights

In Russia, the VAT rate for hotels and other accommodation facilities has been zeroed. 

Russian President Putin, clearly feeling sanctions signed this regulation into law on March 26. Zero VAT will start on April 26, 2022. The current VAT is one of the highest in Europe with 20%

In addition, Russian hotels will receive a tax incentive, according to Federal Law No 67-FZ.

For new facilities and for facilities that have undergone renovation, the zero VAT rate will be valid for five years from the date of commissioning, the Federal Tourism Agency explains.

The grace period for the zero VAT rate is defined for a period of five years, since, according to expert estimates, it is during the first five years of operation that the hotel business can reach operational breakeven.

This measure is designed to make Russia more competitive for tourism. It’s also designed to attract new investors and solve one of the key problems of Russian tourism – an acute shortage of modern high-quality hotels.

Rostourism emphasizes the importance of the new support measure. Currently, the total tax burden exceeds 30% of revenue, while the norm in the tourism industry is less than 10.5%.

A zero VAT rate for hotels is valid in Israel, the United Arab Emirates, Singapore, and a number of other countries. In China, the VAT rate for hotels is 9%, in the EU countries – an average of 7-8%, in Thailand – 7%.

Zeroing or reducing the VAT rate for hotels has allowed these countries to significantly intensify investment activity in tourism. As a result, the income of the tourism business has increased, new jobs were created and, as a result, the collection of taxes from the tourism sector had increased. 

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About the author

Juergen T Steinmetz

Juergen Thomas Steinmetz has continuously worked in the travel and tourism industry since he was a teenager in Germany (1977).
He founded eTurboNews in 1999 as the first online newsletter for the global travel tourism industry.

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