Taxation of income earned through platforms: Airbnb - rental property

A more complex analysis is required to assess the taxability of rental income, as the final tax regime, obligations, tax deductibility of costs or other legal rights on the side of the tax subject are often determined by the details.

The use of digital platforms by individuals for the purpose of renting property is nothing new nowadays. From the perspective of the taxation of such income, as well as the assessment of potential registration obligations arising for taxpayers under the statutory provisions, a number of key attributes need to be taken into consideration:

  • the nature of the service itself,
  • the provision of additional services,
  • time aspect,
  • the frequency of the provision of services.

Depending on these criteria, the income in question may be treated differently from a tax point of view, and its correct classification is crucial in several respects. In general, such income may be considered:

  • income earned from the rental of immovable property,
  • income earned from a business/self-employment (i.e., a sole trader); or
  • so called other income from occasional activities.

Offers of immovable property published through platforms are mostly short-term accommodation services, and if these services are provided repeatedly, they are considered as income from a business/self-employment. However, in this case, a trade license and registration with the locally competent tax office is required.

On the contrary, different conditions apply if the accommodation services are provided only occasionally, or if the services consist of renting out the property without the provision of additional services (e.g., cleaning, catering, towel exchange, etc.). In such circumstances, the income in question can be treated as other income pursuant to Article 8(1)(a) of the Income Tax Act or as rental income pursuant to Article 6(3) of the Income Tax Act. As a result of the more detailed assessment of the earned income, the taxpayer is consequently subject to different (registration) obligations, a different approach to the tax deductibility of expenses or the amount of the resulting tax liability itself.

If the taxpayer provides accommodation services on a recurring basis, in addition to the obligations related to the taxation of this income (income tax aspect), it is necessary to bear in mind the other tax obligations that may potentially apply to it (value added tax aspect). Assuming that an individual uses the services of a platform operated by a foreign person and proves to be a taxable person, the obligation to register for VAT arises prior to receiving the intermediation service.

Do you need advice on the tax implications of the taxability of income earned in the context of rental property or directly on the preparation of your tax return?

Do not hesitate to contact our specialists.

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