Value Added Tax and short-term furnished rentals
On February 22, 2018, a Response published in the Senate’s Official Journal has recently confirmed the application of VAT on short-term rentals which has been made through an internet platform, under certain conditions. This provision applies also to short-term rental agreements that has been made through real estate agencies.
Indeed, the Minister of Economy announced that VAT (article 256 A of the Tax Code) will be charged on short-term rentals in the assumption that the rental agreement includes at least three para-hotel services (a kind of service assimilated to the one provided by a hotel) as those stated under article 261 D 4°-b, such as breakfast, cleaning, linen and reception services.
It should be taken into consideration, that the exemption basis (Article 293 B, 82 Tax Code; 82 800 € threshold applicable in 2018 for housing rentals, hotels, lodgings etc.), gives the right to taxpayers to do not pay VAT if the revenue is below the referred threshold. Nevertheless, the established threshold is easy to reach by luxury villas rentals providing luxurious services, as those located along the French Riviera. This is not unknown to tax professionals; however, it is a noteworthy highlight concerning the possible short-terms control effects that tax authorities might put into place for luxury villas surpassing the threshold stated by law.
Last but not least, since the enactment of the 2017 Financial Law changing the tax scenario for non-habitual furnished rentals by characterizing them as commercial activities, rentals agreed through internet platforms or real estate agencies falling within the scope of this new provision, have made it crystal-clear how VAT is imposed on rentals providing para-hotel services.
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