The provision of accommodation through Airbnb does not constitute rental from a tax point of view

Sept. 26, 2021 Czech Republic

In a recent judgment, the Prague Municipal Court pronounced in detail the tax assessment of the type of revenues generated through the Airbnb platform.

The Prague Municipal Court had addressed the case of a plaintiff who objected to her tax assessment for 2017 by the tax administrator, who described the income from the short-term rental of property through the Airbnb platform as income from independent activities. On the contrary, the applicant considered that activity to be a rental. The judgement in principle confirmed the interpretation of the financial administration published in 2017 under Information on the tax assessment of the obligations of accommodation service providers and ruled that the short-term provision of accommodation via Airbnb-type platforms constitutes an accommodation service and not the rental of property, and because in this case it was done systematically for profit, on her own account and responsibility, this was income from independent activities under Section 7 of the Income Tax Act.

In its assessment, the court found as important in particular the nature and duration of the accommodation provided - that is, that this was a regular activity (in the case of the applicant, incoming payments were being received on average every two days), that the rental of the property was provided for a short and predetermined period, and that the property was offered in a way that evidently targeted people looking for short-term accommodation. The judgement further points to the fact that the accommodation provided through Airbnb generally cannot meet the intended purpose of renting an apartment, as it does not saturate the needs for a living but merely satisfies a need for overnight accommodation - and that the application itself supports such features (accommodation time limit, price calculated per day/week, possible cleaning and no requirement for the user to provide any maintenance of the property) as to define the nature of the provided service as accommodation services.

The plaintiff made a cassation appeal against the judgement to the Supreme Administrative Court, which will re-examine the issue in the context of the cassation objections. The ruling of the Court of Cassation may be expected within a few months.

For landlords who repeatedly or over the long term offer apartments for short-term rent (whether on the Airbnb platform, on other similar platforms, or in some other form), this legal and tax assessment of their activities has major implications. Providing accommodation services on a systematic basis is a business for which a trade license is required. In addition to the different methods of taxation under Section 7 (income from independent activities) compared to Section 9 (income from rent), income from accommodation activities is also subject to social and health insurance. At the same time, it is necessary to consider the obligation to register for VAT when exceeding a turnover of CZK 1 mill. and subsequent payment of VAT from payments received for accommodation services.

If you have any questions, do not hesitate to contact us, we will be happy to help you assess your specific situation.

Jana Pytelková Svobodová
Jana Pytelková Svobodová Senior Tax Manager
ASB Czech Republic
jsvobodova@asbgroup.eu
Kristina Krčmářová
Kristina Krčmářová Senior Tax Consultant
ASB Czech Republic
kkrcmarova@asbgroup.eu