As an exception to the exemption applicable to the renting of immovable goods (article 44, § 3, 2°, a), third indent of the Belgian VAT Code) now foresees that VAT is applicable when providing furnished accommodation:
- in hotels, motels for a period of less than three months; and
- in other establishments having a similar function where people are usually hosted against consideration for a period of less than three months, unless these establishments are not supplying ancillary services.
Three months period
In their comments, the Belgian VAT authorities confirm that successive contracts will be added up. In this respect, it is now expressly stated that, unless there is abuse, only the contract which has the result of exceeding the three-month period will be reclassified as an exempt renting. The same rule is applied for the short-term rental of immovable goods for other purposes than housing.
Hotels and motels
These establishments will only be impacted by the new regime provided accommodations are supplied for a longer period than three months. In this case, the rent will automatically be exempt from VAT.
Nor the VAT Code, nor the Belgian VAT authorities provide or refer to a definition of the terms "hotels" and "motels". Shall it be referred to the regional legislation regarding touristic activities, the qualification ("hotel" or "other establishment") of appart-hotels for instance remains uncertain depending the Region.
Other establishments having a similar function
These other establishments will only need to subject the turnover of the supply of furnished accommodation provided they:
- usually host people against consideration for a period of less than three months; and
- supply at least one ancillary service, these are: physical reception of the guests, supply of household linen and change of the linen at least once a week or daily breakfast.
Usually hosting people for a period of less than three months
Let us assume that a landlord usually rents furnished student rooms, with the supply of clean household linen every week, for the time of the academic year (ten months). This person will remain a VAT exempt taxable person, even if it exceptionally rents a room for one, two or less than three months. This is because the landlord is not usually renting its rooms for a short period.
What in case this would occur every year? It is not rare that (furnished) students rooms are rented for nine or ten months to a student and, during the holidays period to other students (we again assume that household linen are changed every week). Would that yearly short-term renting be considered as a usual activity?
According to the FAQ, the summer renting in our fictitious example could still be exempt from VAT. Indeed, the VAT authorities now clarified what is meant by "usually". Shall the rents related to short-term stays not exceed 50% of the total rents; the landlord is considered as not usually hosting people for less than three months.
The comments from the VAT authorities do not specify if the 50% threshold has to be computed by taxable person or by house/apartment/room. The VAT Code and the FAQ are only speaking of "establishments"…
Furthermore, no tolerance seems to be foreseen (yet?) for persons that are used to renting their house yearly during the two or three weeks of their annual holidays. Would that be considered as a usual short-term renting? Merely based on the turnover criteria, this would be the case as these persons do not receive any other rent.
Reception of guests
With respect to this ancillary service, the VAT authorities adopt a more strict position than foreseen. According to the FAQ, the reception of guest requires a physical presence in the establishment for a large part of the day. It is consequently not sufficient to drop the keys to the hosts once they arrive or to put them in a lock box fixed to the accommodation.
Supply of household linen
According to the VAT authorities, this ancillary service should be interpreted as follows:
- it is sufficient that the household linen are put at the disposal of the guests;
- the beds do not need to be made;
- in case the stay lasts longer than a week, it is sufficient to put the replacement household linen at the disposal of the guest.
Supply of daily breakfast
The daily breakfast must be supplied by the host or by a third party but in the name of and for the account of the host. In this respect, the mere supply of vouchers to have a breakfast at a nearby bar/restaurant is sufficient.
Reminder: a global price is not required
As a reminder, the new regime will also apply in case ancillary services are proposed as an option to the guests for a separate price and if the guests are effectively ordering such an optional service.
In case of questions, please do not hesitate to reach out to your regular contact within the Fieldfisher Belgium tax team.
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