Commission charged by online travel agents are subject to WHT

Commission paid or payable to nonresident online travel agents (OTAs) or booking engines are subject to withholding tax (WHT) irrespective of payment arrangements between the two parties, MIRA has stated in a circular issued.

According to the Business Profit Tax Act, commission paid or payable to non-residents are subject WHT. Sometimes, payment arrangements are such that OTAs collect payments from tourists on behalf of the tourist establishments, and then deduct the commission before sending the payments to tourist establishments. One of the main reasons of this circular was to remove the prevailing doubts as to whether such commissions fall within the commission subject to WHT as specified in the Business Profit Tax Act.

As per the circular, commission paid or payable to OTAs falls within such commission subject to WHT irrespective of payment or room selling arrangements between the OTA and the tourist establishment. Hence, tourist establishments must account for WHT on such commission from 1 January 2017.

29 Dec 16