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Vacation rental or student room with or without VAT? More clarity as of 2022

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The bill below and accompanying legislative amendments have since been ratified in the Law of 27/12/2021.

Real estate in the VAT legislation, it will probably never become simple. One of the topics that often remains unclear is property rental: when do you charge VAT and when not. In principle, property rental is always exempt from VAT, but there are numerous exceptions that nevertheless lead to taxability. With a new draft law, the legislator hopes to bring more clarity to one area: the provision of so-called "furnished accommodation". As of July 1, 2022, this concept will be defined more broadly and concretely less discussion should exist. In addition, it was recently included in the preliminary draft of the Programme Act that certain lessors who are or will be subject to the VAT system will no longer be able to benefit from the so-called exemption scheme for small enterprises, and this already as of 1 January 2022. A combination that will ensure that the rental landscape will soon look a little different.


When to rent out with VAT?

In principle, property rental is always exempt from VAT. However, when "furnished accommodation" is provided, the rental must be subject to 6% VAT.

For the interpretation of the term "provision of furnished accommodation", the link was often made in the past to hotel services, which are always subject to VAT. If the rental took place under similar circumstances as the rental of hotel rooms, then the reduced VAT rate of 6% was applicable. Whether or not VAT was payable was therefore always a question of fact, in which duration on the one hand and any services offered on the other were important factors. However, a legal definition was lacking at the time.

In order to put an end to the many discussions, the legislator now applies the following criteria, which must be met at the same time in order for there to be a VAT-taxable rental of furnished accommodation:

  • It must be a rental for a period of less than 3 months. Please note that for successive contracts between the same parties, the sum of the duration of the individual contracts will be taken into account.
  • There must be a minimum range of services where at least 1 of the services listed below must be offered.
    • Physically welcoming the guests
    • Provision of household linen and change at least once a week
    • Daily breakfast

Where these services may be offered at a separate price and these may be optional. In addition, these services may also be outsourced to a third party.

This definition puts an end to the discussion about the rental of student rooms, among other things. Since such rooms are rented out for a longer period, this rental will always be exempt from VAT, regardless of whether additional services (e.g. cleaning) are offered.

Please note that hotels, motels and similar establishments, offering a minimum number of services, are always considered to meet the two conditions above. If they thus rent for a period of less than 3 months, this rental will always constitute a VAT taxable transaction.


Small business exemption regulation

In addition, landlords who fall under the new definition of furnished accommodation will no longer be able to benefit from the small business exemption scheme, according to a preliminary draft of the Programme Law. Through the small business exemption scheme, companies with an annual turnover of less than EUR 25,000 can opt to remain exempt from VAT. However, VAT taxable lessors of furnished accommodation will be excluded from the application of this scheme. In concrete terms, this means that a lessor who meets the criteria will be liable for VAT from the first euro of turnover. This exclusion already applies as of January 1, 2022.

However, the legislator provided for a single exception to be able to rent without the application of VAT, namely the application of the exemption system of the sharing economy. Conditions of this system are:

  • Rental of furnished lodging by a private individual;
  • Conducted through an electronic platform recognized or organized by the government;
  • Of which the maximum annual revenue is EUR 6,390 (revenue year 2021).

It is important to note that one of the biggest players in the sharing economy, AirBnB, has not yet received recognition in Belgium. The preliminary draft therefore provides for a short transitional arrangement (until June 30, 2022) in which it is stipulated that the electronic platform does not need to be "recognized".


VAT liability not always a disadvantage

Being VAT liable does not always have to mean a disadvantage. When you say VAT, you also say VAT deduction. The VAT paid on all investments, maintenance work and goods directly related to the rented property can therefore be deducted. A currently VAT-exempt lessor who, as of 1 July 2022, must nevertheless charge VAT, will still be able to recover part of the (historic) VAT paid in the past.


The concept of furnished accommodation should therefore give rise to fewer discussions as of 1 July 2022. This, combined with a change to the exemption regulation for small businesses, which already takes effect on January 1, 2022, ensures that landlords should think about the possible impact of this new regulation.


If you have further questions about this new measure and about the possible impact of the right to deduct on VAT please feel free to here contact us.