Do you have any income from AirBnB? Czech Tax Authority started targeting for untaxed income.

30/09/2018

Maybe you have already heard about nowadays phenomen in providing of flats and other premises for short-term "accomodation". It´s called AirBnb and it became so popular in many countries that it must be ofthen regulated since too many flats are provided through this online platform.

it sounds very easy - providing your flat to other persons for some nice daily price, paying a little fee to AirBnB and considering this income as "minor" or "interim".

The evil (tax evil, for sure) lies in the definition what AirBnB represents. Is it a rent? Is it a business activity?

If you even have income from AirBnb, please read this article since you might face tax inspection and tax penalties.


What is AirBnB income from tax perspective?

The Czech Tax Administration issued written explanation that using AirBnB as a provider of a short-term "rent" is to be considered as an accommodation = reoccurying business activity and that it shall not be considered as a rental activity.

Accommodation services that are hosted through Internet platforms like AirBnB are considered by the Czech Tax Administration as an accommodation service and as a rent.
The reoccuyring business activity means that any person who will use AirBnB as provider (=who creates AirBnB account and offers any premises to customers and receives payments for it) will be considered as a business person. Any business person must comply with many requirement set out by the Czech Law. Therefore higher administrative burden accompanies this business activity and there are also different tax implications from income tax and Value Added Tax perspective.


How can Tax Administration know about my income from AirBnB?

it is known already for a few months that the Czech Tax Administration received the list of all AirBnB providers in the Czech Republic incl. the dates and amounts. Czech Tax Administration has even already started to sending warning letters to all those people who taxed the AirBnB income either as a rental income or do not tax it at all.

What does it mean for you?

If you are starting with AirBnB as provider, you must comply with many legal requirements listed below:


  1. You must register yourself at the Trade Licence Office for accomodation services.
  2. You must register yourself at the local Tax Office as a business person (income tax).
  3. You must register yourself at the Social Contributions Agency as a business person (social contributions).
  4. if you participate in the public health insurance system in the Czech Republic, you must register yoursefl at your Health Insurance Agency as a business person (health insurance).
  5. Once your receive the first income from AirBnB and AirBnB deducts its first provision, this transaction is considered as a service received from VAT payer registered in another EU country. Based on it, you must register yourself as VAT identified person at the local Tax Office and you must declare this services in the VAT tax return on monthly basis and pay VAT 21 % from the total amount of AirBnB fees.
  6. You become a regular VAT payer if the total turnover of money received from AirBnB activity exceeds 1 mil. CZK over ANY 12 consecutive calendar months. Afterwards you must calculate the Czech VAT from AirBnB income and pay it to the Tax Authority. With regular VAT payer status, many other commitments are connected like filling of VAT control statement or applying VAT on top of also other non-AirBnB income.
  7. You must pay the municipal fees to the city of Prague since you provide accomodation services.
  8. You must make evidence of all people who hosted in your flat/appartment.

If you already had some AirBnB income and you didn´t comply with the regulations, there is currently no general pardon applied on it. You must file the complementary income tax return and do the registrations for VAT, social contributions and health insurance.

What is the financial impact?

Depending on your situation, you must tax your income from AirBnB as a business income under § 7 of the Czech Income Act. As expenses you can apply either real expenses (you must prove such expenses by receipts and payments), or fixed expenses (calculated either 60 % or 40 % from income from AirBnB).

The income tax base from above calculation is then subject of social contributions (29,2 %) and health insurance (13,5 %) and depending on your other income you must pay monthly advanced for health insurance and social contributions.

Last but not least you must pay 21 % for VAT calculated from the AirBnB fees.

If you are or become a regular VAT payer, you must pay 15 % VAT from all your AirBnB income.

Please note the individual commitments and tax amounts always depends on your particular situation.

If you need any assistance or explanation, please feel free to contact us.

Wishing you a nice day,

TrimmTax

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