Lower VAT for hotel services will decrease the rate of grey economy

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Lower VAT for services in hotels with four stars in the North and five stars on the coast was passed in the end of July.

Introducing lower rates of value-added tax VAT for hospitality services such as serving food and drinks will contribute to tourism and decrease in grey economy, Olivera Brajović, general Director of Directorate for Touristic Development and Standards in Ministry of Sustainable Development and Tourism, believes.

Lowering VAT in hotels with four stars in the North and hotels with five stars on the coast was the only change in the Law on VAT that passed in the end of July. This amendment whose implementation was postponed until 2018 was received with critiques from the public that believes it will give advantage to investors close to the Government.

Brajović, on the other hand, claims that the main goal of lowering VAT is to improve hotels and budget.

“The fact is that this amendment will increase budget using touristic activities, taxes and salaries, as well as commercial activities adjacent to the industry”, Brajović said for Weekend Edition of Dnevne Novine daily.

The goal is to develop tourism

According to her, this amendment to the law was done in order to accomplish goals from Strategy for development of tourism of Montenegro by 2020.

“The Strategy defines a goal that our country should become a high quality touristic destination with a variety of offer on a yearly basis, which will contribute to employment, decrease in poverty and balanced development. One of the measures in the Strategy is development of high quality accommodation, and by 2020 there should be 300.000 beds, 110.000 of which in hotel capacities”, Brajović explained.

EU practice

She said that one of the reasons for changing the Law on VAT was to be in accordance with EU standards. According to a directive from European Commission from 2006, members of the Union must have standard rates of VAT of at least 15%.

“There is no limits to the maximum rate. Countries can also have lower rates on goods and services, but no less than 5%. If we look at some of EU members practice, we can see lower VAT in restaurants defined differently. In Italy, Spain and Austria you have 10% lower VAT, in Sweden 12% lower, in Finland 14%, Cyprus and Ireland have 9% lower”, Brajović concluded.

Source: Cafe Del Montenegro