Czech Republic: Tax assessment of short-term rentals via online platforms was confirmed by the Municipal Court

In brief

The recent decision of the Municipal Court in Prague relating to short-term rentals has stirred up discussions throughout the professional community and attracted considerable attention of the press. In our opinion, however, there were no real reasons for this.


The Municipal Court in Prague has recently upheld the long-standing opinion of the Czech tax administration, issued in 2017, that the income of providers of short-term rentals via the Airbnb platform (but the same argument may be made for and other similar platforms) may, under certain circumstances, be regarded as a business income, not as a rental income, and should be taxed as a regular business activity. Although the judgment was rendered by a court of first instance only, the Supreme Administrative Court would be very likely to uphold the decision (if the plaintiff appealed against it) in our opinion.

As indicated above, the court ruled that short-term rentals may fall under accommodation services and, therefore, be taxed as a business income. According to the court, it is primarily the nature of the provided accommodation that needs to be considered, where the nature of the lease satisfies housing needs of the tenant, as opposed to needs of short-term accommodation. In this particular case, the court referred to the fact that the plaintiff had been receiving remuneration for the services from Airbnb every two days on average which did not really support the classification of the provided services as lease services. The criteria that could classify flat rental as provision of accommodation services rather than a common lease also include the provision of additional services (e.g., housekeeping, hygiene supplies, etc.) or how the price is calculated (e.g., the fee charged per night indicates accommodation services, etc.).

The decision ‒ or more precisely the distinction between lease and accommodation services ‒ affects not only the income tax, but also the health and social security payments and VAT. In the case of leases, landlords are generally exempt from VAT; however, the situation is different with the provision of accommodation services which are subject to 10% VAT and may require the VAT registration of the service providers. In addition, if a service provider receives a service from Airbnb (or another platform not established in the Czech Republic), this service provider is obligated to register as what is referred to as an identified person. 

In addition, rental providers are obligated to obtain a trade license for the provision of accommodation services, register for health insurance and social security and file the respective mandatory reports (e.g., tax return, social security and health insurance reconciliation reports). In addition, accommodation premises should comply with the Building Act and an accurate occupancy permit is also required, as regulations for flats for rent and premises for accommodation differ.

As aforementioned, the court decision has not introduced any changes. It has merely confirmed the approach of tax authorities and the practice that already is (or should be) adopted by property owners/businesses.

We will be happy to answer any questions you may have relating to potential tax and other consequences.

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