Budget excerpt: New concessions for Tourism sector

Madam Speaker, representatives of the Dominica Hotel and Tourism Association (DHTA) requested a review of the fiscal incentive regime under which concessions are granted to investors. The DHTA submitted a list of the measures, which it identified as critical and necessary, to increasing investments in the sector, ensuring profitability of tourism enterprises, guaranteeing quality service delivery and safeguarding sustainable jobs.

I can report, that a committee comprising representatives of both the private and public sectors, deliberated on these matters and submitted recommendations for the consideration of the Government.

As a result of these deliberations, Cabinet approved a number of new concessions to the hotel sector. These include the following:

• Amendments to the VAT Act to include the exemption of VAT on meals to hotel/resort employees provided free of charge. This matter was strongly put forward by the private sector as necessary for ensuring quality service.

• Amendments to the VAT Act to zero rate complimentary rooms provided by hotels and resorts for select approved marketing activities.

• Amendments to the VAT Act to include exemptions on capital goods for mixed-use Resort Developments, where part of the development will occur after the commencement of operations. This means that for a hotel which is being constructed in phases, a VAT exemption will be enjoyed on those phases not yet completed, even when the completed phases are in operation. This will apply to approved developments.

• Amendments to the Income Tax Act to accommodate exemptions on withholding tax, on rental income of villa owners, for a period of ten (10) years. The villa must be held for at least three (3) years before change of ownership. This will apply to approved developments.

• Amendment to the Income Tax Act for an exemption from the payment of income tax, on the rental income on villas, for a period of ten (10) years. The villa must be held for at least three (3) years before change of ownership. This will apply to approved developments.

• Introduction of a Residential Levy of $2,000 per annum, on all villa owners. This levy applies only to villas in approved developments.

• New legislation will be introduced in Parliament to allow for the sale of timeshare, condominium and fractional ownership.

• Amendment to the Alien Landholding Licence Act # 17 of 1995 to reflect the following fee structure for approved developments:

o In place of the licence fee of 10 per cent of the market value of the subject of the licence, a flat fee of $5,000.00 will be applied, in addition to an application fee of $1,000.

Approved developments are defined as proposals that meet the requirements outlined in the Hotels Aid Act, with a minimum investment of $3.0 million.

Such projects should commence construction within one (1) year following the approval by the Physical Planning Division. Failure to begin within the stipulated time, without a reasonable excuse, will result in a penalty of $20,000.

• Amendment to Section 8 of the Stamp Act Chapter 68:01. A definition of the term “Related Parties” is to be included in the Act to provide for a transfer between an individual, to a company where the individual owns at least 25 per cent of the shares of that company, and transfer from a first company, to a second company, where the first company owns at least 25% of the shares of the second company.

• Further, there will be a reduction in fees to encourage transfers between related parties as well as in new qualifying approved projects. The changes in fees are as follows:

• Stamp duty reduced to 2.5% from 4%
• Vendors fee reduced to 0 from 2.5%
• Judicial fee reduced to 1% from 2.5%
• No change to the Assurance Fund of 1%

The above shall apply to new qualifying projects except the vendor’s fee which shall remain at 2.5 per cent.

It is expected that the legislative amendments required will be submitted for the consideration of the Parliament shortly.