Changing obligations of accommodation providers

Value added tax

In light of judgements by the European Court of Justice, the financial administration has expressed its opinion on the difference between an accommodation service and the lease of immovable property:

In a lease arrangement, the landlord transfers to the tenant for consideration for a negotiated period the right to use the property as if they were the owner, as well as the right to exclude any other person from the exercise of such a right. A lease is a rather passive activity dependent on the mere passage of time, even though the time or the lease period is not in itself a decisive criterion as to whether it is an accommodation service or lease. According to the financial administration, crucial is what is objectively offered as part of the performance, regardless of how the parties involved qualify the arrangement. Services that are mediated through internet platforms in most cases meet the characteristics of accommodation services according to the 55 CZ-CPA classification code.

The financial administration points out that economic activity is any activity performed for the purpose of a regular income. It is completely irrelevant whether the result is profit or loss or whether the person who operates the accommodation service owns the necessary trade license. Thus, a person supplying accommodation through internet platforms must be regarded as a taxable person supplying services subject to VAT.

As regards the place of supply and the person liable to declare tax, the question may be more complex: services providing the use of an online platform (i.e., electronic services) can be provided to both taxable and non-taxable persons. Thus, under certain circumstances, the obligation to declare tax may arise both to the accommodation provider (intermediation fee) and indirectly to the guest staying (fee for using the internet platform). It is therefore necessary to examine who in effect the recipient of such services is as well as the nature of the service. If the service recipient is a VAT payer, the obligation to declare tax is on this person. If the recipient is a taxable person who is not registered as a VAT payer, such a person becomes a person identified for VAT on the date of receipt of the service. Only where the recipient is a non-taxable person will the intermediary platform itself pay the tax on the service on that person's behalf.

Personal income tax

The financial administration highlights that from the personal income tax perspective it is essential whether the provision of accommodation meets the characteristics of business activity (i.e., independent performance of gainful activity on one's own account and liability as a trade or in a similar manner with the intention of doing so consistently for profit). If this is the case, the income is then subject to tax as income from independent activity. If the accommodation provider does not claim expenses in their actual amount, they may claim expenses in as a percentage of income: 60% or 40%, depending on whether they hold the relevant trade licence. If a natural person meets the conditions laid down by the Income Tax Act, they may also enter the lump-sum tax regime and tax this income by a lump-sum tax rate.

If accommodation services are provided by a legal entity, income from accommodation services should be declared in their corporate income tax return.

Accommodation service providers should not forget about related obligations that may arise, e.g., under the Income Tax Act, the Accounting Act, or insurance laws. This may include, e.g., the obligation to keep accounts, tax records, records of income or records of receivables if they claim expenses as a percentage of income, the obligation to register for personal income tax and health and social insurance contributions as a self-employed person, etc.

Real estate tax

The GFD’s information also includes new information regarding real estate tax. If accommodation services are provided in an immovable property, the property will be subject to the relevant real estate tax rate set for business activity (CZK 10 per m2 of built-up or floor area). A taxable unit/building is considered to be used for business even if unoccupied on 1 January of the taxable period