As the world gradually recovers from the COVID-19 pandemic, the allure of travel is stronger than ever. But before you rush to book your dream vacation, it’s crucial to factor in all potential costs, including an often-overlooked expense: tourist taxes.


Decoding Tourist Taxes

Tourist taxes are levies imposed on travellers, providing a revenue stream for the host country or city. These taxes, specifically aimed at non-residents and non-citizens, help distribute the tax burden away from local inhabitants. Unlike broad-based taxes such as GST or value-added tax, which apply to everyone, tourist taxes are exclusive to visitors.

In recent times, several countries have introduced or are planning to introduce tourist taxes. The primary motivation behind this move is to manage the adverse effects of over-tourism, a phenomenon that leads to strain on local infrastructure, overcrowding, and environmental degradation due to a surge in tourists.


Countries Implementing Tourist Taxes

1. Malaysia

In Malaysia, a tourist tax of RM$10 (S$2.91) per room per night is levied. This tax applies to all types of accommodations and has been in effect since September 1, 2017. The collected tax is then remitted to the Royal Malaysian Customs Department.

2. Thailand

Thailand is contemplating a tourist tax of 300 baht (S$11.61) per foreign tourist, likely to be implemented after the next government formation, expected in September this year. The tax will be collected upon entry and will be used for accident insurance for tourists, tourism restoration, and repatriation of the remains of foreign travelers who pass away in Thailand.

3. Indonesia, Bali

Starting in 2024, Bali will require overseas visitors to pay a tourist tax of IDR 150,000 (S$13.29). The revenue from this tax will be allocated for environmental and cultural preservation. This initiative aims to transition Bali from mass tourism to a more sustainable and high-quality tourism destination.

4. Bhutan

Bhutan charges a hefty tourist fee of US$200 (S$266.12) per person per day during peak periods. This fee includes accommodation, transportation, a guide, food, and entry fees. This comprehensive fee helps manage the number of tourists entering the country and ensures they contribute to the local economy.

4. Japan

Japan has implemented a departure tax, requiring visitors to pay 1,000 yen (S$9.44) when leaving the country. The tax aims to better manage the tourism sector, which has seen a significant increase in visitors since reopening its borders.

5. New Zealand

Tourists, working holidaymakers, students, and workers entering New Zealand are charged a fee of $35 (S$28.88) known as the International Visitor Conservation and Tourism Levy. However, Australians are exempt from this fee.

6. European Union

Starting next year, non-European Union citizens will need to pay a €7 (S$10.33) application fee to enter the EU. This fee does not apply to individuals under 18 or over 70 years old.

7. France

In France, a tourist tax is added to hotel bills, varying in rate depending on the city. The fees range from approximately €0.20 (S$0.30) to €4 (S$5.90) per person, per night. The funds collected are used to maintain tourism infrastructure in cities like Paris and Lyon.

8. Italy

Tourist taxes in Italy differ based on the location visited. For example, in Rome, fees range from €3 (S$4.43) to €7 (S$10.33) per night, depending on the type of accommodation.

10. Venice

Venice plans to introduce a tourist fee of €3 (S$4.43) to €10 (S$14.75) per person, based on the season. The implementation of this policy has been postponed multiple times, but it is expected to take effect in 2023 or 2024.

11. Spain

11a. Barcelona

Barcelona’s tourist tax will be increased over two years, starting with a municipal fee of €2.75 (S$4.06). In 2024, the fee will rise to €3.25 (S$4.79) and the proceeds will be used to improve the city’s infrastructure.

11b. Valencia

A tourist tax will be implemented in Valencia, applicable to all types of accommodation. The rate will be between €0.50 (S$0.74) and €2 (S$2.95) per night, for up to seven nights, depending on the chosen accommodation. The tax funds will support the sustainable development of the region’s tourism industry and provide affordable housing for locals in tourism hotspots.

12. Portugal

Tourist taxes in Portugal are charged per night per person for individuals over the age of 13. The fee varies by municipality, with an average rate of around €2 (S$2.95) per night. Typically, the tax is only applicable for the first seven days of a stay.


Conclusion

In conclusion, numerous countries worldwide have implemented tourist taxes to manage the influx of visitors, address issues of over-tourism, and generate revenue for tourism-related initiatives. These taxes can be collected through various means, including accommodation operators, entry points, or as part of the overall travel expenses. It’s important for travellers to consider these additional costs when planning their vacations.


FMS’s Take on Tourist Taxes

While tourist taxes may seem like an additional expense for travellers, they play a crucial role in managing the negative impacts of over-tourism and supporting local infrastructure and conservation efforts. By implementing these taxes, countries can ensure that tourists contribute to the sustainability of the destinations they visit. As travellers, it’s important to understand and respect the need for these taxes and the benefits they bring to both locals and visitors.


Investing in Dividend Funds: A Strategy for Building Passive Income

At FMS, we recommend our clients to invest in dividend funds as a strategy to build passive income. Let’s consider a specific example: if a client invests $48,000 per year for 10 years at a 6% yield, the total value of the portfolio after 10 years would be approximately $588,000. This portfolio can generate an annual passive income of about $35,280 at a 6% yield.

Building passive income is beneficial for three main reasons:

  1. Financial Independence: Passive income can provide a steady stream of income without active work, leading to financial independence.
  2. Risk Diversification: It serves as an additional income source, diversifying your income streams and reducing financial risk.
  3. Retirement Planning: Passive income can supplement retirement savings, providing financial security in your golden years.

However, it’s important to note that while building passive income can contribute to financial stability, it’s also essential to budget for additional expenses like tourist taxes when planning your vacations.


How To Get Started?

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Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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