Tokyo to Introduce 3% Hotel Tax Without Cap

Why Tokyo Is Moving to a Percentage Based Hotel Tax

Tokyo is preparing a major change to how visitors are taxed on overnight stays. City officials have drafted a plan to replace the long standing fixed nightly fee with a 3 percent levy on the room price, with no upper cap. The aim is to better match contributions to the cost of a stay, so guests in premium rooms pay more than those in budget accommodation. The move would also widen the base of who pays by bringing more types of lodging into the system.

The city expects the overhaul to almost double yearly accommodation tax revenue, rising from about 6.9 billion yen to nearly 14 billion yen when fully in place. The draft will go through a public comment period, then an ordinance is expected to be submitted to the metropolitan assembly in February for debate. If approved, the change would take effect after April 2027. The plan would extend the tax to private lodgings and hostels, closing gaps that left some stays untaxed.

Protecting low cost travel is part of the design. Officials have signaled that an exemption threshold will be raised so cheaper nights are not taxed. Early discussions have referenced an exemption around 15,000 yen per night, and draft language has cited a floor near 13,000 yen. Final thresholds and calculation rules will be set during the legislative process.

What changes for guests and operators

Tokyo introduced its accommodation tax in 2002 and it has not kept up with today’s market. At present there is no tax if the nightly rate is under 10,000 yen, 100 yen if it is between 10,000 and 15,000 yen, and 200 yen if it is 15,000 yen or more. The charge is assessed per person per night and many private lodgings have fallen outside the scope.

Under the proposal, eligible stays would be charged 3 percent of the room price, without a cap. Simple examples help illustrate the change. A 15,000 yen night would carry a 450 yen tax, up from 200 yen today. A 30,000 yen night would be 900 yen. For a 100,000 yen suite, the tax would be 3,000 yen. On ultra premium stays of 300,000 yen, the charge would reach 9,000 yen per night. Japan’s 10 percent consumption tax remains separate and continues to apply to the room rate and many services. Hotels and inns typically collect the accommodation tax at checkout and remit it to the city.

Who is likely to pay more, and who may pay less

Guests booking high end rooms are likely to see the biggest change. International brands and luxury properties often price rooms at levels where a percentage levy produces a larger contribution than the flat fee ever did. For mid range stays, the charge will be noticeable but still a small share of the bill, and it will move up or down with seasonal prices.

Budget travelers stand to benefit from a higher exemption threshold. Students on school trips and many business travelers who book economy rooms often fall under 15,000 yen per night, so a large share of those stays would pay no accommodation tax under the new design. The proposal also brings short term rentals and hostels into scope. If a private lodging night exceeds the threshold, the host would levy the tax and pass it on to the city. If it does not, no tax would be charged.

Why Tokyo wants more revenue from tourism

The fixed fee has fallen behind the city’s needs as visitor numbers set records. Managing crowds on popular transit routes, keeping streets clean, funding multilingual services, and caring for cultural sites all require steady resources. A static 100 to 200 yen charge does not adjust with inflation and does not reflect the rise in premium travel that has reshaped Tokyo’s hotel market.

Budget figures highlight the gap. The tourism policy budget is projected at about 30.6 billion yen for the next fiscal year, while accommodation tax receipts are near 6.9 billion yen under the current scheme. A 3 percent, no cap levy that rises with room prices would help close that gap and tie funding more closely to market conditions.

How Tokyo compares across Japan

Accommodation taxes in Japan are set locally, so travelers see different systems from region to region. Tokyo adopted the country’s modern accommodation tax first in 2002 and still uses a fixed schedule. Osaka charges between 100 and 300 yen depending on price. Kyoto runs a tiered system introduced in 2018 and approved major increases, with future charges ranging from 200 yen to as much as 10,000 yen per person per night for stays of 100,000 yen or more. Kanazawa uses a 200 or 500 yen fee depending on the rate. Miyagi Prefecture has a 300 yen tax for qualifying stays. Fukuoka collects both a prefectural and a city tax, which are combined on the bill.

A few places already use percentage rates. Kutchan in Hokkaido applies 2 percent of the accommodation fare in the Niseko area. Okinawa has considered a proportional approach. Tokyo’s 3 percent proposal would make it one of the first big cities in Japan to adopt a percentage based system. With no upper cap in the draft, very expensive rooms would generate a higher yen amount than Kyoto’s top tier once prices climb far enough. For example, a 400,000 yen night in Tokyo would result in a 12,000 yen accommodation tax at 3 percent, while Kyoto’s planned maximum is set at 10,000 yen.

Global context and industry response

Percentage lodging taxes are common worldwide. Many cities in the United States layer hotel occupancy taxes on top of sales taxes, and combined rates in some destinations exceed 15 percent. Houston reports a total tax near 17 percent. Cities across Europe and Asia also use percentage levies or per night fees to fund tourism services, protect historic sites, and support local infrastructure.

Industry reaction in Tokyo is focused on pricing, contracts, and systems. Properties may absorb some of the charge during slow periods, then pass it through during peak seasons. Others could adjust package structures, depending on how the city sets the calculation rules for bundled services and fees. Operators of private lodgings and hostels will need clear, simple tools to collect and remit the tax. Digital platforms that handle bookings may be tasked with collection if the ordinance requires it.

Implementation timeline and what travelers should do

City officials plan to gather public comments, then submit the ordinance to the metropolitan assembly in February. If approved, the change would begin after April 2027. That timeline gives hotels, travel agencies, and platforms time to update systems. The exemption threshold, scope, and calculation details will be finalized during this process.

Travelers booking stays for dates after the effective month should review the final rules and check total prices on confirmation pages. Accommodation providers in Tokyo already disclose the existing metropolitan accommodation tax in their terms, often as a separate line item payable at the property. That practice is likely to continue. Once in force, the 3 percent levy would appear alongside Japan’s 10 percent consumption tax on bills.

What to Know

• Tokyo plans to replace the 100 to 200 yen fixed hotel tax with a 3 percent levy tied to the room price.
• The new charge would apply to most stays above an exemption threshold that officials aim to raise.
• Budget guests under roughly 15,000 yen per night are expected to be exempt, subject to final rules.
• The plan extends the tax to private lodgings and hostels that were previously outside scope.
• Annual revenue is projected to rise from about 6.9 billion yen to nearly 14 billion yen.
• There is no cap on the tax, so yen amounts increase with room prices.
• The ordinance is slated for assembly debate in February, with a start after April 2027 if approved.
• The accommodation tax is separate from Japan’s 10 percent consumption tax.
• Other regions use different systems, and Kutchan already applies a 2 percent rate.
• Luxury stays and international brand properties would contribute more under the new system, while many budget nights would pay nothing.