Payment Standards re Credit/wire transfer and withholding tax

[jbtut]

I'll keep the dive op's info and location out of this for the time being, so just a generic question: Should you expect to add 7-10% to your payment if you pay by card in S.E. Asia if the country has a withholding tax or should you expect the company to include the tax in it's pricing.

Basic facts are: arranged diving with dive op. No notice in multiple emails to arrange that CC are not accepted. Week long dive trip bill was ~1600USD. Expected to pay by CC. Second to last day, asked to confirm and was told we use Paypal. I have an account, no problem.
Morning of departure, settling up in office, owner of dive op said we only take cash. Well, you're SOL, as we have no local currency - you picked us up from the airport directly and took us to your resort. There are no ATMs for roughly 1hr driving distance. We haven't left the resort, what did you expect?
Response: We do take paypal, but we add a 10% fee to cover "bank costs". Or you can wire money when you get home.
Ok, no I'm not paying that, we'll stop at ATM on the way to the airport. ATM would require about 10 transactions and lots of fees. Opt to wire money when we get home.

Dive op now wants an additional 7% to cover wire transaction fees.

I've checked rates, Paypal is 3.5%, bank of deposit charges about $10USD. The 7% is to pay a withholding tax in that country, which is a prepayment against income tax on businesses because they all cheat on taxes.

I need to send $ ASAP because I DO want to pay my bill and intend to do so (we'll leave all the other issues with that dive op for another review).

I'm inclined to say no, that's your income tax amount, and as a business it's your responsibility to pay that. It was never mentioned in any of our emails that you wanted cash or that you expected customers to pay your income tax. This cannot be the first time this has happened. I've never experienced it in my diving at three other resorts in S.E. Asia.


I need a reality check. Am I out of line here? Is it standard in the region to require cash only or a 10% increase in your bill to pay the dive op's income tax withholding?

 

[ocdiver1]

I know nothing about and have never heard about income tax withholding, but I have been in your position many, many times before in dealing with varying options of payments and what additional charge I've been requested to pay for them. Although I always confirm this upfront so I can make an informed decision as to how I'd then want to pay, it doesn't sound like the cash only policy was prominent on their website (or you likely would have noticed) and you state it was never mentioned in emails. I've been quoted or charged probably a range of 0-5% for credit card payment, haven't been charged additional for Paypal (although I know it's expensive for the receiver), although Paypal doesn't come up that often, and have never been charged for a wire transfer. I usually opt for a wire transfer as I usually wind up saving at least $100 when compared to other options.

Are the resorts stated prices even in dollars? If not, I bet when they converted the local currency into dollars they converted at an inflated rate and you were probably already losing money there. I see that all the time and obviously it really adds up. Personally, it sounds like some of the things they've said to you sounds dubious at best, both from the amount of the surcharge to the reasons for doing so, and their payment policies should have been more prominent...and I would just pay the $1600 with nothing additional and not feel guilty about it

 

[Doubler]

I paid my upcoming trip to Truk via wire transfer to the organizer in the P.I.. We agreed upon the price and I transferred that amount to his bank. The bank had increased it's fees between the time of the transaction and the time funds arrived. The shop contacted me, with paperwork verifying this increase and I agreed to pay it. The profit margin on these trips is slim and if everybody on the charter fails to pay the difference the shop actually loses money through no fault of their own. As far as paying income tax, that is BS. The shop earned the income, they should pay the taxes. In most cost models this should all have been figured in anyway.

 

[vladimir]

I need a reality check. Am I out of line here? Is it standard in the region to require cash only or a 10% increase in your bill to pay the dive op's income tax withholding?

No, it is not standard. Indeed, I have never encountered it in multiple trips to Malaysia, Thailand, the Philippines, and Indonesia. Indonesia does force you to exchange currency on payment (ie, their prices are in dollars, but they won't let you pay in dollars), but they are transparent about it, they don't spring it on you at check-out. It sounds pretty shady to me. If you don't mind, could you PM me the name of the dive operator if you choose not to make it public.

 

[jbtut]

Thanks for the responses! It's great to have a site like this to get some objective advice.

To help clarify, the website says nothing about payment options either way. We emailed a couple resorts in the area to get quoted prices and availability. The package I understood to be basically all inclusive as we were paying for transport, lodging, diving, and all meals at the same resort.


Prices were quoted in both USD and local currency, and it was optional which currency to pay in. They offered two routing numbers, one for local currency and one for USD and it appeared indifferent as to which was used. There was no mention anywhere in any of the communications that cash was preferred or that an additional fee would be added for non-cash payment. If they simply would have let us know we all could have brought cash with. I'm not terribly keen on carrying that much cash, but I would have. Also we sent a deposit to reserve our room and it was optional to wire or paypal with no mention of cash preference or additional fee added.

The thing that doesn't sit well with me is that this must happen at least once a week. I don't know why they wouldn't make it a point to either (a) put it on the website anywhere, or (b) put it in emails, or (c) simply factor it into the pricing and consider it a bonus when someone pays cash and they can dodge income tax.

Here's a link explaining the withholding tax. The tax is collected by the bank on deposits to business accounts and credited against the business' income taxes is how I understand it.

Also, one last detail, there was effectively no internet available at the resort. They had a wireless router with a 3g internet receiver plugged in, but, only once for a short time in 6 days did it connect to the internet. (They had a reliable connection for the office, but it was not available for guests.)


Doubler, this was an all in-house operation. Dive boat, shop, and resort are all the same owner. They have an in house compressor room. It was simple, but well set up and made clean air. Rental equipment was very old - my BCD was a "Mirage Pro" that had to be 15 years old and had no back plate, not sure if it came with one, and had a dive weight belt looped in where a cumber bun strap likely originally was. The low pressure inflator leaked, but otherwise it was functional enough. Based on the price compared to the area I think the profit margin is large.

I'll try to write up a full review later though at this point I plan to wire funds today so I'm just trying to figure out how much to send. I'm leaning toward the bill amount and not the tax withholding.

 

[AquaAli]

It looks like the dive shop is in the Philippines?

When I've travelled to Indonesia, I've been stung a couple of times with hidden service charges and tax (sometimes upto even 20%), but after it happened a couple of times at bars and restaurants, I always made sure to ask about service charges and tax, especially at hotels. So in other words, yes its happened to me, but not in a dive context and not on such a large amount of money.

Throughout SE Asia I have come across dive shops charging up 7% on credit cards, but they always made it pretty clear once I mentioned paying by card, and it was always on remote islands without ATMs, so I knew cash would be an issue and bought a lot with me.

Don't know if that helps your situation, but it might help people in the future?

Sorry to hear that your trip ended with a bitter experience

 

[jbtut]

It looks like the dive shop is in the Philippines?

When I've travelled to Indonesia, I've been stung a couple of times with hidden service charges and tax (sometimes upto even 20%), but after it happened a couple of times at bars and restaurants, I always made sure to ask about service charges and tax, especially at hotels. So in other words, yes its happened to me, but not in a dive context and not on such a large amount of money.

Throughout SE Asia I have come across dive shops charging up 7% on credit cards, but they always made it pretty clear once I mentioned paying by card, and it was always on remote islands without ATMs, so I knew cash would be an issue and bought a lot with me.

Don't know if that helps your situation, but it might help people in the future?

Sorry to hear that your trip ended with a bitter experience

Thanks Ali,

We still had fun. The actual sea life and diving was really good. There were some some good things along with a few other "issues" with the dive resort. I'll put an objective review with pics and video in the Philippines sub-forum soon. I'm not trying to badmouth anyone. I actually would hope they read it. I might send them an email when I have my thoughts together. I think a few changes could really improve their business.

 

[vladimir]

Jbtut, thanks for the PM; I look forward to your review. I only have a couple of dive trips to the Philippines so far, and they are in my backyard, so your input is useful to me.

 

[stevenl]

In general: a surcharge for credit card payments can be applies and will quite often be applied. Bank costs in Thailand can be up to 3% for that (American Express more expensive). Service charges should be on menu/pricelist. Ridiculous charges IMO, but as long as they are clearly announced I do pay. However, withholding tax, especially unannounced, and having had ample opportunity to announce this I would not pay.

So I am with you, I would pay but not the tax.

 

[DevonDiver]

Response: We do take paypal, but we add a 10% fee to cover "bank costs". Or you can wire money when you get home.
Ok, no I'm not paying that, we'll stop at ATM on the way to the airport. ATM would require about 10 transactions and lots of fees. Opt to wire money when we get home.

I've checked rates, Paypal is 3.5%, bank of deposit charges about $10USD. The 7% is to pay a withholding tax in that country, which is a prepayment against income tax on businesses because they all cheat on taxes.

From my experience (novice paypal business user), you aren't accurate.

I know for a fact that if I charged 3.5% I would lose money on the transaction (versus the invoiced cost).

Yes... the "basic fee" for receiving money is 3.4% (+20p GBP)

BUT... there is also a "cross-border" transaction fee of 1.5 - 4.9%

ALSO...Paypal don't have the most competitive currency exchange rates. They also charge a currency conversion fee of 2.5-4.0% above market rates. They can often cause a substantial difference between the banking of what is requested and what is received. Something that any prudent business would ensure against, through the imposition of a generalised transaction fee.

It's a shame that Paypal aren't more transparent about their fees for business owners. I'd love to send accurate invoices - where Paypal could add the necessary fees in advance. They don't - which means businesses have to 'guesstimate' what the charges will be...and add them as a statutory amount. It sucks... for all parties concerned (except Paypal).