Prague court’s tax ruling court adds nail to Airbnb’s coffin

Income earned by apartments through online platforms such as Airbnb should be treated like any other accommodations business by tax authorities. That’s the verdict in a long-awaited court ruling in a case brought by the lawyer of a client who claimed the income should be treated as rent. The result for those who rent their apartments out on a short-term basis is that the payments they make for social security and health insurance is the same as if they owned a pension or hotel. The daily Hospodářské noviny writes that tax experts were largely unsurprised by the ruling, which was unimpressed by the lawyer’s claim that short-term rentals should be classified as “occasional business activity”. The court quite sensibly described Airbnb as an accommodations service. “The decision could ruin Airbnb’s entire business model,” says Lukáš Eisenwort of the tax consultancy at EK Partners. He added that the change in classification would also require landlords earning more than CZK 1 million annually to charge VAT, which isn’t the case in long-term rentals. In a way, it comes down to who washes the sheets and how often the landlord receives payments. If the tenants of an apartment make their own beds and make monthly payments, chances are the landlord will be able to classify the income as rent. If the landlords takes care of cleaning and is paid by various tenants, he’s probably in the accommodations business.

 

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