Airbnb, B&B or student room? Check your VAT status!
If you rent out a house or an apartment in Belgium, this service is normally exempt from VAT. This means that the owner is not allowed to charge VAT on the rental price or deduct input VAT relating to the property, such as VAT incurred on the construction cost, purchase price or repair works. This VAT exemption also applies if the rented property is furnished, and you do not provide any additional services.
Hotel services, on the other hand, also consist of other services provided to the guests like reception, cleaning, restaurant, etc. and are normally subject to VAT. The applicable VAT rate in that case is 6% instead the standard rate of 21%. When it comes to renting out a furnished property or one or several rooms, with or without additional services, people often use electronic platforms like AirBnB or Booking.com.
Traditionally, hotel services are only subject to VAT if the following services are systematically provided to all guests for one total price:
- Furnished accommodation is made available;
- Reception available on site most of the day;
- One of the following additional services: (a) regular cleaning during the stay, (b) household linen is changed during the stay, (c) daily breakfast.
The service is not subject to VAT if one of these services is not provided, or they are only made available for an additional fee.
In practice, many homeowners that earn this type of rental income, are not aware of the VAT implications. Given that the current conditions to qualify as a hotel service are quite strict, landlords can often easily avoid charging VAT. Even if people are aware they need to register for VAT, they can also opt for the exemption scheme for small entrepreneurs if they have an annual turnover of less than €25,000. In that case, no VAT should be charged on the rental price and no quarterly VAT returns need to be submitted.
Furthermore, there is also the possibility to opt for the exemption regime of the sharing economy. Specific conditions must be considered for this. This regime can only be applied by private individuals, not by companies. In addition, it is required that the services are offered through an electronic platform recognized by the Belgian tax authorities. Note in this regard that the largest player, Airbnb, has not yet received such recognition. Finally, your annual turnover (excl. VAT) may not exceed €6,390. Although this amount is indexed annually, it is considerably lower than the threshold of the exemption scheme for small entrepreneurs.
Recently, the Belgian Government has announced some changes that will significantly affect the VAT regime of short-term rented property.
Since 1 January 2022, private individuals (and companies) who offer furnished accommodation with additional services are excluded from the small business scheme. This means that homeowners will need to charge VAT from the first euro and comply with the relevant VAT requirements.
It is important to mention that the exemption regime of the sharing economy has remained in place. As it is a requirement that the services must be provided through an electronic platform recognized by the tax office and Airbnb has not yet been recognized, a transitional arrangement (until 30 June 2022) has been put in place in which it is stipulated that the electronic platform does not have to be ‘recognized’.
As from 1 July 2022, the following conditions will be taken into consideration to qualify as a taxable hotel service:
- The furnished accommodation is rented out for less than 3 months. This implies, for instance, that student room operators, who usually sign contracts for 3, 6, 10 or 12 months, will not qualify as taxable hotel service;
- The landlord offers one of the following additional services: (a) reception on site during the entire stay (not just at time of arrival/departure), (b) household linen is changed during the stay (at least once a week), (c) daily breakfast.
The short duration will therefore become a necessary condition for the rental service to qualify as a taxable hotel service.
In addition, the services do not necessarily have to be provided by the landlord directly. They may be outsourced to an external party. Each service can be charged separately (instead of one total price for everything). Finally, clients do not have to opt for the additional services, such as breakfast or cleaning. It is sufficient that the services are offered as such.
Being liable for VAT is not always a disadvantage. If you charge VAT, you will also be entitled to a VAT deduction. The VAT paid on the construction, repair works, and goods directly related to the rented property can therefore be deducted. A currently VAT-exempt landlord who needs to charge VAT from 1 July 2022, will be able to recover part of the (historical) VAT paid in the past.
Those homeowners that do not qualify for the sharing economy exemption and whose services will potentially be subject to VAT after 30 June 2022, need to consider registering for VAT. Please note that registering as a self-employed service provider for VAT purposes in Belgium, will also trigger a requirement to register for social security, which might bring additional contribution requirements.