Tourism is the sector where Grenadian VAT gets most complicated. A single guest might pay for a room, breakfast, an island tour, a dive, airport transfers and drinks at the bar, and each item can sit in a different place in the VAT rules. Hotel accommodation has long been charged at a reduced rate rather than the standard 15 per cent, while food and drink, retail sales and most other services are standard-rated. Packages that bundle everything together need a method for splitting the price.
This page is written for owners and managers of guesthouses, small hotels, villas, tour and dive operators and restaurants. It explains the main rates as widely reported, how packages and service charges are usually handled, what booking platforms change, and the mistakes that lead to assessments. Rates and sector rules have been adjusted several times since VAT was introduced in Grenada in 2010, so confirm the current position with the Inland Revenue Division or a tax adviser who works with tourism clients.
Which rate applies to what
The standard rate of VAT in Grenada is 15 per cent. Hotel accommodation has been charged at a reduced rate, widely reported as 10 per cent, and some reports have extended reduced-rate treatment to certain other tourism services. Which services qualify has varied over time and depends on the legislation and any orders in force, so check how your specific activity is classified rather than assuming that anything sold to tourists qualifies.
Restaurant meals, bar sales and retail items such as souvenirs, spices and clothing are generally standard-rated. A small hotel that runs a restaurant open to the public therefore charges different rates on the room bill and the dinner bill. Transport, excursions and activities need checking individually. Exported services and some international transport may be zero-rated.
The registration threshold applies across the whole business. A guesthouse whose room revenue alone is below EC$300,000 but whose total taxable supplies, including meals and tours, exceed it must register.
Accommodation businesses
Room charges. Room revenue is the core reduced-rate supply. The rate applies to the accommodation itself, and the invoice should show the room charge, the rate applied and the VAT amount.
Meals included in the rate. Bed and breakfast or half-board rates combine a reduced-rate supply with standard-rated food. The business needs a reasonable, consistent way of allocating the price between the two; agree the method with your accountant and apply it every time.
Villas and holiday apartments. Short-term letting to visitors is generally treated as accommodation, whereas long-term residential letting is commonly exempt. A property moving between the two needs careful records, because the VAT treatment changes with the type of letting.
Extras. Laundry, minibar, spa treatments, bicycle hire and excursions sold at the front desk are separate supplies, generally standard-rated unless a specific rule applies.
Deposits and cancellations. Deposits taken in advance may create a VAT liability when received rather than when the guest arrives, and retained cancellation fees have their own treatment. Ask how the rules apply to your booking terms.
Tour operators, dive shops and transport
Activity businesses face the most uncertainty over rates. Island tours, hikes to Grand Etang and the waterfalls, rainforest and chocolate tours, snorkelling trips to Moliniere Bay and dives on the wrecks off St George's are all services consumed in Grenada. Whether any qualify for the reduced rate depends on how the law defines eligible tourism services at the time. An operator should obtain a clear answer from the Division, ideally in writing, and price on that basis.
Packages that include park entry fees, lunch and transport combine items with different treatment. Entry fees collected on behalf of a public body and paid over in full may be treated differently from the operator's own charge. Lunch is generally standard-rated. Keep invoices that show the components, so that the VAT can be worked out properly and defended if queried.
Taxi and transfer services have their own licensing regime. Operators who are registered for VAT should check how transport supplies are classified, since public transport and private hire may not be treated in the same way.
Restaurants, bars and service charge
Food service is generally standard-rated, but a few points cause recurring confusion for restaurants serving visitors:
- Displayed prices. Menus aimed at visitors often show prices before VAT and service charge. Whatever the practice, the bill should show VAT clearly, and the approach should be consistent.
- Service charge. A mandatory service charge added to the bill is usually part of the price for the supply, which in most VAT systems means VAT applies to it. Confirm the treatment with the Division and apply it consistently.
- Voluntary tips. Tips left at the customer's discretion and passed in full to staff are generally treated differently from compulsory charges, though their handling also has income tax and payroll implications.
- Takeaway and catering. Supplies of food for events and takeaway sales should be checked for their classification rather than assumed to be the same as dining in.
- Complimentary items. Free welcome drinks or staff meals may have VAT consequences if the input tax on them was claimed.
Booking platforms, agents and foreign payments
Many Grenadian guesthouses and villas sell most of their nights through international booking platforms. The platform takes a commission and pays the balance to the owner, often in US dollars to an overseas or local account. For VAT, the starting point is that the accommodation is supplied in Grenada by the property, and VAT is due on the full price paid by the guest for the stay, not only on the net amount received after commission.
The commission charged by a foreign platform is a service bought from abroad. How imported services are treated, and whether any VAT or withholding obligations arise on the commission, are questions for your accountant. Keep the platform's monthly statements, which show gross booking values, commissions and payouts, as part of your VAT records.
Overseas tour wholesalers and travel agents raise similar issues. Contracts with them should state whether rates are inclusive or exclusive of Grenadian VAT. Rates agreed as all-inclusive mean the VAT comes out of your margin, so check contracts before signing.
Seasonality, cash flow and quoting prices
Grenada's tourism year is uneven. The winter months from December to April bring the bulk of visitor arrivals, while the late summer and early autumn are quiet, with many small properties closing for maintenance. VAT follows revenue, so the largest payments fall in the busy months, but returns are still due in every period, including the months a property is closed.
Deposits complicate the picture. A villa that takes deposits in August for Christmas stays may owe VAT on those deposits in the period they are received, long before the guests arrive. Setting aside the VAT element of every deposit in a separate account avoids a cash squeeze when the return falls due.
When quoting to overseas agents, wholesalers and direct guests, be explicit about whether rates include VAT and service charge. International guests are used to very different conventions, and a quote that appears to add 10 or 15 per cent at checkout causes complaints and poor reviews. Many Grenadian properties now quote inclusive prices to the public for that reason, while keeping the VAT element clear on the invoice.
Mistakes the Division commonly finds
Declaring net platform payouts. Declaring only the amount received after commission understates sales and VAT. Declare the full price paid by guests.
Applying the reduced rate to everything. Charging the accommodation rate on meals, bar sales or extras underpays VAT. Each supply needs the correct rate.
No method for packages. Allocating package prices inconsistently, or in whatever way minimises tax that month, invites challenge. Choose a reasonable method, document it and stick to it.
Forgetting to register. Small properties that grow, add a restaurant or start selling tours may cross the threshold without noticing. Review turnover quarterly.
Mixing personal use with business. Owners who use part of a property themselves need to separate that use. Input tax on personal-use areas is not claimable.
Frequently asked questions
What VAT rate applies to hotel rooms in Grenada?
Hotel accommodation has been charged at a reduced rate, widely reported as 10 per cent, rather than the standard 15 per cent. Rates can change through legislation, so confirm the current figure and which accommodation qualifies with the Inland Revenue Division.
Do restaurants in Grenada charge 15 per cent VAT?
Restaurant meals and drinks are generally standard-rated at 15 per cent when the business is VAT-registered. Many bills aimed at visitors also include a separate service charge. Check the bill for how VAT and service charge have been calculated.
Do small guesthouses have to register for VAT?
Only once total taxable supplies pass the registration threshold, widely reported as EC$300,000 a year. That figure includes meals, tours and other extras as well as rooms. Smaller properties may register voluntarily if it makes financial sense.
Is VAT due on the full price when guests book through a platform?
Generally, VAT is calculated on the price the guest pays for the stay, not on the net payout after the platform's commission. The commission itself is a separate service bought from abroad. Ask an accountant how to treat both.
Does VAT apply to the service charge on a restaurant bill?
A compulsory service charge is usually treated as part of the price of the supply, so VAT typically applies to it. Voluntary tips are treated differently. Confirm the current treatment with the Division and apply it consistently.
Do dive and tour operators charge the reduced rate?
Some reports indicate certain tourism services qualify for the reduced rate, but eligibility depends on the legislation in force. Operators should obtain a clear ruling from the Inland Revenue Division for their specific services before setting prices.
