Renting of furnished accommodation will not systematically be subject to VAT anymore
Locations
General framework
The renting of immovable goods is in principle exempt from VAT in Belgium. The Belgian VAT Code however foresees several exceptions.
One of these exceptions relates to the services supplied by hotels, motels and other establishments where people are hosted for consideration.
The Belgian VAT authorities currently consider that the provision of furnished accommodation, the reception of guests and the supply of at least one specific service (regular cleaning of the accommodation, supply and change of household linen or supply of breakfast) were sufficient to characterize "establishments where people are hosted against consideration" (see a.o. administrative decision n° 98.904 dated 30 May 2002).
Further to a Ruling confirming that the renting of a student room with additional services could be subject to VAT according to this exception, the Belgian government decided to adapt the Belgian VAT Code.
Proposed change
According to the draft-law (proposed change to article 44, § 3, 2°, a), third indent), VAT would be applicable to the supply for a period of less than three months, of furnished accommodation by hotels, motels and 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 any of the following ancillary services, i.e.:
The renting of immovable goods is in principle exempt from VAT in Belgium. The Belgian VAT Code however foresees several exceptions.
One of these exceptions relates to the services supplied by hotels, motels and other establishments where people are hosted for consideration.
The Belgian VAT authorities currently consider that the provision of furnished accommodation, the reception of guests and the supply of at least one specific service (regular cleaning of the accommodation, supply and change of household linen or supply of breakfast) were sufficient to characterize "establishments where people are hosted against consideration" (see a.o. administrative decision n° 98.904 dated 30 May 2002).
Further to a Ruling confirming that the renting of a student room with additional services could be subject to VAT according to this exception, the Belgian government decided to adapt the Belgian VAT Code.
Proposed change
According to the draft-law (proposed change to article 44, § 3, 2°, a), third indent), VAT would be applicable to the supply for a period of less than three months, of furnished accommodation by hotels, motels and 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 any of the following ancillary services, i.e.:
- reception;
- provision of household linen and change of the linen at least once a week (if the stay last for longer than a week); or
- daily breakfast.
The three months period would be determined on the basis of the services contract. In case of successive contracts of less than three months, each contract’s duration would be added up.
The Belgian VAT authorities will probably clarify whether only the contract having for effect to exceed the three months period will be requalified as an exempt renting, as applied for the short-term rental of immovable goods for other purposes than housing, or whether all contracts concluded between the parties will be requalified. While the Explanatory Memorandum of the draft law makes the parallel with the regime applicable to non-housing short-term rental, it does not expressly confirm that the same logic will apply.
The supply of ancillary services is only imposed for other establishments than hotels and motels. For these other establishments, it is thus required to supply a furnished accommodation with at least the reception of guests, the provision of household linen and change of the linen at least once a week or the supply of a daily breakfast. These ancillary services may be invoiced separately from the supply of the accommodation.
The term "usually" targets landlords exceptionally renting their property to a tenant for a shorter term than three months in order to avoid that they have to apply VAT (and VAT register) for this single contract.
Potential impact on VAT deduction for certain actors
It is important to note that the proposed change also implies that hotels or motels renting a room for more than three months would have to VAT exempt such rents. Hence, this activity would impact their VAT deduction right/the VAT previously deducted.
While the Explanatory Memorandum of the draft law points out that the impact for hotels and motels should be limited as these establishments are usually renting rooms for a short period, it seems to forget that other types of establishments frequently rents furnished accommodations (with additional services) for longer periods. One may think to apart-hotels or assisted living not benefiting from a VAT exemption for social reasons. It remains to be seen whether the situation of these actors will be further clarified.
Expected entry into force
The new regime would enter into force on 1 July 2022.
The Belgian VAT authorities will probably clarify whether only the contract having for effect to exceed the three months period will be requalified as an exempt renting, as applied for the short-term rental of immovable goods for other purposes than housing, or whether all contracts concluded between the parties will be requalified. While the Explanatory Memorandum of the draft law makes the parallel with the regime applicable to non-housing short-term rental, it does not expressly confirm that the same logic will apply.
The supply of ancillary services is only imposed for other establishments than hotels and motels. For these other establishments, it is thus required to supply a furnished accommodation with at least the reception of guests, the provision of household linen and change of the linen at least once a week or the supply of a daily breakfast. These ancillary services may be invoiced separately from the supply of the accommodation.
The term "usually" targets landlords exceptionally renting their property to a tenant for a shorter term than three months in order to avoid that they have to apply VAT (and VAT register) for this single contract.
Potential impact on VAT deduction for certain actors
It is important to note that the proposed change also implies that hotels or motels renting a room for more than three months would have to VAT exempt such rents. Hence, this activity would impact their VAT deduction right/the VAT previously deducted.
While the Explanatory Memorandum of the draft law points out that the impact for hotels and motels should be limited as these establishments are usually renting rooms for a short period, it seems to forget that other types of establishments frequently rents furnished accommodations (with additional services) for longer periods. One may think to apart-hotels or assisted living not benefiting from a VAT exemption for social reasons. It remains to be seen whether the situation of these actors will be further clarified.
Expected entry into force
The new regime would enter into force on 1 July 2022.
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In case of questions, please do not hesitate to contact the Belgian Tax Team of Fieldfisher.