Are you renting out on Airbnb? Then you are liable to tax, says financial administration

In its information, the financial administration notes that, according to the VAT case law of the Court of Justice of the EU, activities carried out by lodging providers via internet platforms such as Airbnb are to be treated as accommodation services rather than a lease. 

From a personal income tax perspective, it is crucial whether the provision of lodging fulfils all the criteria of a business activity (i.e. a gainful activity carried out independently, on one’s own account and responsibility, in the form of a trade or in a similar manner, with the intention to do so consistently for profit). If so, income from accommodation is subject to personal income tax as income from an independent gainful activity. If lodging providers do not claim expenses in their actual amount, they may claim expenses as a fixed percentage - 60% or 40% - of income, depending on whether they hold a trade licence. 

If accommodation services are provided by legal entities, they must report income from accommodation services in their corporate income tax returns, as the income from all activities and the disposal of all assets is liable to this tax.

In terms of VAT, according to the GFD, the provision of accommodation services is the performance of economic activities and a person who provides such services is a person liable to VAT. Such supplies are thus included in the calculation of the turnover decisive for mandatory VAT registration. If the lodging provider is already a VAT payer, the provided accommodation services represent taxable supplies that must be reported in VAT returns. Lodging providers must also take into account services that they receive from entities operating the internet portal (e.g., Airbnb). If such an entity is not resident in the Czech Republic and provides electronic services, such as service fees for the internet portal use, the lodging provider must declare and pay VAT on this type of supply. If the lodging provider is not yet a VAT payer and receives electronic services from an entity not residing in the Czech Republic, the lodging provider must register as a person identified for VAT.

Lodging providers should not also forget their duties associated with the electronic reporting of sales. If providers receive payments in cash, by credit card or in any other similar way, they must report them pursuant to the Act on Electronic Reporting of Sales. Although the GFD’ s information does not mention social and health insurance, the financial administration’s interpretation also affects statutory contributions to the social security and health insurance schemes.

The information primarily targets shared services provided via internet portals such as Airbnb. Owing to the considerable variability of situations that may arise in real life when using items of real property, we are sure that it will not be an easy task to apply the information on specific cases in practice. It is therefore quite possible that the GFD’s information will have to be amended in future.