Lease of real estate via Airbnb considered business activity

The tax authority for the capital of Prague called on an individual to file an income tax return on the grounds that income from a lease contract generated by this taxpayer in the 2017 taxable period should have been included in a separate tax base for the taxation of income from an independent activity.  The individual did not agree with the tax authority and included this income in a separate tax base for the taxation of income from leases arguing that the lease at issue only involved the provision of a “bare” lease, without any ancillary services.

The tax authority maintained its position claiming that the substance of accommodation services via Airbnb consists in the provision of short-term accommodation including services such as the provision of soap, towels, bedlinen, etc., which by its nature meets the criteria of an entrepreneurial/business activity. The tax authority further argued that since the individual received payments once every two days on average, the lease could not have been long-term but rather involved the provision of accommodation services even if no ancillary services were rendered. The Municipal Court in Prague sided with the tax authority and dismissed the action on this matter (6 Af 20/2020-28).

The court took into account the nature of entrepreneurial/business activities and the definition of business in the Civil Code and the Trade Licensing Act while also applying available foreign case law under which the short-term nature is a typical feature of leases for business purposes. The court noted that an entrepreneur is a person who independently performs gainful activity, on their own account and responsibility, as a trade or in any similar manner with the intention to do so consistently for profit. 

The court also emphasised that the purpose of a lease should be the provision of housing needs. In contrast, accommodation provided via Airbnb does not satisfy anybody’s housing needs but only the need for temporary accommodation and, consequently, must be treated as an accommodation service. Other features typical for accommodation services are, e.g., the provision of ancillary services such as cleaning, ensuring regular maintenance or setting price for short periods of time. In the opinion of the court, it is not essential whether the lease is defined as a “bare” lease (i.e. without any ancillary services), but in what manner the activity is carried out. The court therefore concluded that in this case, the individual’s income was generated from an activity showing the signs of a business activity and not of a lease. 

The court’s decision confirmed the tax administrators’ existing practice. The decision may certainly be applied to similar short-term leases, whether or not offered via other internet portals.