A recently issued judgment file no. 6 Af 20/2020–28 of Prague Municipal Court confirmed the way of taxing income from providing short-term rental via the Internet platform Airbnb.

In the judgment, Prague Municipal Court (hereinafter “the Court”) reached the conclusion that income from providing short-term rental via Airbnb is considered income from a business activity in the sense of article 7 of Act no. 586/1992 Coll., on income taxes (hereinafter “the ITA”), and not income from rent according to article 9 of the ITA. This conclusion is identical to an earlier opinion of the financial administration, which was published in 2017 in the Information of Tax Obligations of Providers of Accommodation Services.

The main reason for the decision of the Court is the fact that provision of accommodation services via Airbnb usually includes other complementary services such as the provision of toiletries, towels, bedding, final clean-up etc., which in its nature corresponds to a business activity. In its judgment, the Court also stated that the aim of rent should be to provide for housing needs with a long-term intention. Accommodation provided via the Airbnb platform consists in satisfying the need only for temporary, or short-term accommodation. Although the physical person (plaintiff) argues in the dispute that this was only a provision of so-called bare rent without complementary services, the course classified the provision of accommodation as an accommodation service, not rental.

Re-classification of the income from providing accommodation, which belongs to the partial based of tax from self-employment, has an impact not only on the way of taxing the income, but for taxpayers, who previously considered their income an income from rent are in danger of additional assessment of social security, health insurance and VAT.

A difference in the taxation of the income may be in the application of flat-rate expenses, if the lessor does not use actual expenses. For income from rent, it is possible to use a flat-rate of only 30 % for expenses, while in case of income from self-employment it is possible to apply a 40 % flat rate for expenses, or 60 % (if the lessor has set up a trade for providing accommodation services). Until the end of the year 2020, income from business were subject to solidarity tax, and for taxpayers with higher income there is therefore also a danger of retrospective additional assessment of income tax.

Income from self-employment, unlike income from rent, is also subject to social security and health insurance and there is a danger of additional assessment of premium here as well. From the perspective of VAT, income from the provision of accommodation services is not exempted (in the way income from rent is), and since the Airbnb platform is operated by an entity not residing in the Czech Republic, the lessor should immediately become a person identified for tax and return VAT from accepting mediator services. After achieving turnover of CZK 1,000,000, the taxpayer should apply VAT to the accommodation services themselves, too.