The rental of real estate is in principle exempt from VAT. However, rental for a short period of time, so-called short-stay, is subject to VAT.
This has the advantage that the VAT on the costs associated with this rental - such as (re)construction costs of the property - can be deducted. Recently, the Arnhem-Leeuwarden Court of Appeal further clarified the conditions for short-stay rentals. In this alert, we discuss this in more detail.
Conditions of short-stay rental
Short-stay rental exists if an accommodation is provided for a short period of time within the framework of hotel, boarding house or in sectors with a similar function. What exactly is to be understood by this has been clarified by the State Secretary of Finance:
- the space is rented furnished;
- No automatic renewal of the lease;
- a maximum lease term at a time of 6 months ;
- after the expiration of the term, a (new) lease must be concluded;
- Effective competition with the hotel industry; and
- the tenant does not move the center of his/her social life to the leased property.
Arnhem-Leeuwarden Court of Appeal ruling
The Court recently further clarified/added to the above conditions. In its ruling, it ruled as follows:
- If tenants register in the Municipal Register and, in addition, do not have other housing, the center of social life is moved to the rented property.
- The rental of an immovable property is not comparable to rental in the context of the hotel, boarding house, camp and vacation spending business if the following are involved:
- municipal taxes, water board charges and/or energy costs are borne by the tenant;
- the tenant is responsible for minor repairs and keeping the leased property clean; and/or
- tenants have a right of first refusal to purchase the leased property.
- If the tenants have to take care of the inventory themselves, it is not a furnished rental.
- If there is an obligation of effort to extend the temporary lease, there is no short-term rental.
It is therefore important to assess whether short-stay rentals exist on a case-by-case basis.
Short-stay rental interesting?
For entrepreneurs, it can be interesting to rent out real estate short-stay. The VAT on costs incurred in this context is then fully deductible. This can be interesting if, for example, costs are incurred for a renovation, whereby the renovation involves newly manufactured real estate. This can therefore provide significant VAT savings.
However, the 'short-stay doctrine' can lead to discussions with the tax authorities. Should the tax authorities be of the opinion that a short-stay rental does not exist, the previously deducted VAT must be repaid (plus any penalties and tax interest). It is therefore important to take stock of whether your situation meets the conditions set for short-stay rentals and whether this also corresponds to economic reality.
Do you have any questions as a result of this news article and/or are you curious to know if short-stay rentals are an opportunity for you? Please feel free to contact us through your relationship manager, by email at btw@govers.nl, or by phone at 040 - 2 504 504.