"Kot for rent". With or without VAT?
"Kot for rent". With or without VAT?
February 2022 – Why charge VAT on the rental of student rooms? To be able to deduct the VAT paid on the construction (or refurbishment) of these rooms. At the end of 2020, an investor obtained a ruling that allowed him to charge VAT and thus also deduct VAT on the investment and maintenance. However, the legislator objected to this.
Hotel service
Real estate rental is in principle exempt from VAT. The VAT paid on the investment in the building and on the costs related to this activity is therefore not deductible. However, there are several exceptions to this rule, including an exception for the provision of furnished accommodation.
For the Belgian tax authorities, the provision of furnished accommodation is considered to be the provision of hotel services: in this respect, the tax authorities are thinking of the reception of guests, furnished rooms, the provision of linen, cleaning and possibly also breakfast.
Hotels and B&Bs clearly fall under this exception. But for the rental of holiday homes, for example, it is less clear, although the services in question are also offered there.
After several positive rulings by courts and tribunals, the tax authorities have decided to accept the letting of holiday homes with VAT. Several rulings have been issued to this effect. And in this respect, the Ruling Commission always bases itself on the above-mentioned criteria (reception, cleaning...).
But still on the basis of these criteria, the Ruling Commission had to confirm at the end of 2020 that the letting of student rooms (in return for the provision of the above-mentioned services, such as reception and cleaning) could also be subject to this VAT regime.
The government tried to oppose this through several bills, but failed because the Council of State ruled that these bills were discriminatory. But a November 2021 bill seems to have put everyone in agreement.
Rental
The notion of 'provision of furnished accommodation' is now legally delimited by a quantitative criterion: there is only a question of provision of furnished accommodation if the rental of the property lasts no longer than three months. In the case of short-term letting to tourists or visitors, it is indeed a question of hotel service. Renting to tourists or business travellers is usually done for a short period of time, so that the quantitative criterion is fulfilled.
According to the legislator's reasoning, the letting of student rooms or the letting of holiday homes for a longer period of time is more akin to the letting of real estate.
The value of the additional services in this case is less important and it is therefore no longer a hotel service.
Please note that the quantitative criterion does not only apply to the provision of the accommodation. It also applies to the person of the service provider. If someone usually rents out student rooms for periods of three months or more, the time he rents out a room for a shorter period will also be exempt from VAT.
Additional services
In addition to the quantitative criterion, the legislator takes into account additional services. Furnished accommodation is only provided if at least one of the following services is offered (even if the rental period is less than three months)
guests are physically welcomed ;
linen is provided;
breakfast is provided each day.
If at least one of these services is offered and the rental period is less than three months, it is a hotel service and VAT is due.
It should be noted that the cleaning of the room - which until now was included in the additional services - is no longer included in the law.
Hotel or motel
Entrepreneurs who are allowed to call their accommodation a "hotel" or "motel" - these are protected designations - are automatically subject to the VAT regime for the supply of furnished accommodation. They only need to prove that they meet the quantitative criterion.
From 1 January
This regulation comes into force on 1 January 2022 and does not contain any transitional provisions. This means that those who currently rent out holiday homes for periods of four months, for example, can no longer charge VAT. The impact of this new regulation on the VAT already deducted is not yet clear. The number of VAT taxpayers in this situation is unlikely to be very large, but there are several large players in the market, specifically in the student accommodation sector, who will lose an important advantage and will therefore have to rethink the financing of their projects.