Short-term rental of premises via websites

Service-Tax

Investments in real estate are becoming a popular and profitable form of investing funds. Buying real estate in tourist destinations is becoming more and more popular. In this case, the rental is usually made via online platforms. How should short-term rental of premises on tax grounds be accounted for?

Business lease

Let us recall that the concept of economic activity is defined in Art. 5a point 6 of the Personal Income Tax Act. Pursuant to this provision, a non-agricultural economic activity is a gainful activity:

  1. manufacturing, construction, trade, service;
  2. consisting in searching for, identifying and extracting minerals from deposits;
  3. consisting in the use of things and intangible assets

conducted on its own behalf, regardless of its result, in an organized and continuous manner, from which the revenues obtained are not included in other revenues from the sources listed in art. 10 sec. 1 points 1, 2 and 4-9 of the Act.

Activities are excluded from the scope of the non-agricultural business activity if the following conditions are jointly met:

  1. responsibility towards third parties for the result of these activities and their performance, excluding liability for committing unlawful acts, shall be borne by the party ordering the performance of these activities;
  2. they are performed under the direction and in the place and time designated by the ordering party;
  3. performing these activities does not bear the economic risk associated with the business.

Therefore, in order for given revenues to be included in a source which is non-agricultural economic activity, three conditions must be met:

  1. the positive premises referred to in Art. 5a point 6 of the act referred to above, which makes it possible to state that we are dealing with an economic activity;
  2. there were no negative premises referred to in Art. 5b paragraph. 1 of the Act and
  3. it was excluded that the revenues obtained are included in one of the other sources of revenues listed in art. 10 sec. 1 of the Personal Income Tax Act.

At the same time, income from business activity is also income from rental, sublease, lease, sub-lease and other contracts of a similar nature, assets related to business activity (Article 14 (2) (11) of the PIT Act).

Therefore, if the subject of the lease are assets related to economic activity or the lease is the subject of this activity, the rental of the assets is treated as non-agricultural economic activity.

The possibility of taxing the lease of the premises with a lump sum

Art.1 point 2 of the Act on flat-rate income tax on certain revenues earned by natural persons - hereinafter referred to as the flat-rate act - regulates taxation with flat-rate income tax on certain revenues (income) obtained by natural persons who obtain revenues from lease, sublease, lease, sublease or other contracts of a similar nature, if these contracts are not concluded as part of non-agricultural business activity. Natural persons who obtain revenues from rental, sublease, tenancy, sublease or other agreements of a similar nature, if these agreements are not concluded as part of non-agricultural business activity, may pay a lump sum on recorded revenues, as referred to in Art. 2 clause 1a of this act.

Example 1.

The taxpayer bought three apartments in Kołobrzeg for short-term rental. The buyer does not run a business. The purchased apartments will be rented to tourists. In such a situation, can the taxpayer choose to tax the rental with a registered lump sum?

In this case, the revenue earning from the lease agreement is not concluded as part of non-agricultural business activity, thus the taxpayer may pay a lump sum on recorded revenue. The fact that the real estate is rented out for the short term is irrelevant to the choice of the method of taxation in this case.

Short-term rental of premises via online platforms - VAT

By providing services in accordance with Art. 8 (1) of the Act on tax on goods and services - hereinafter referred to as the VAT Act - is understood as any service for a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods within the meaning of the VAT Act. It follows from the structure of VAT that a taxpayer who performs taxable activities is obliged to tax a given activity at the time when the tax obligation arises. Considering the above, short-term rental is subject to VAT. For short-term rentals, the tax rate is 8%. So short-term rental is subject to VAT, and taxpayers making it should tax it at the rate of 8%. In this case, it does not matter whether the online platform is involved in the provision of the service.

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The moment when the tax obligation arises - issuing an invoice

Taxpayers making short-term leases via online platforms often do not know when they will be liable for VAT. We will use an example to illustrate the problem.

Example 2.

The taxpayer owns a dwelling that is rented out for short-term accommodation. The duration of the lease is defined in days. The property owner issues a rental offer through websites such as booking.com, airbnb. The client interested in renting accepts the offer and makes a prepayment to the bank account of the website where he found it. At this stage, the taxpayer is not yet fully or partially paid. It is made only in accordance with the regulations. This settlement is based on the fact that the website deducts the amount previously agreed in the contract for the fee for the provision of the online offer service from the payment received from the customer, and then pays the rest to the landlord's bank account.

Importantly, the websites provide or enable the taxpayer to independently generate documentation from the system that clearly identifies which specific services and activities are related to the payment provided by the website. The taxpayer issues an invoice documenting the rental for VAT payers. All services provided to natural persons for whom no VAT invoice has been issued are included in the collective internal document issued by the taxpayer at the end of the month. The landlord wonders when the VAT liability arises.

In this case, the moment when the tax obligation arises for VAT payers is the date of issuing the invoice, but on the condition that the invoice will be issued before the payment deadline specified in the website regulations. So in this case, the moment when the tax obligation arises in respect of the provision of the above-mentioned short-term rental services of the premises will be established in accordance with Art. 19a paragraph. 5 point 4 lit. b of the VAT Act, i.e. at the moment of issuing the invoice documenting this service.

The moment when the obligation arises when the invoice for the lease is not issued

As the example shows, in many cases the taxpayer does not issue an invoice because the rental is made by natural persons. Let us recall that pursuant to Art. 669 § 2 of the Civil Code, if the term of rent is not specified in the contract, the rent should be paid in advance, namely: when the lease is to last no longer than a month - for the entire duration of the lease, and when the lease is to be longer than a month or the contract was concluded for an indefinite period of time - until the tenth day of the month. In a situation where the taxpayer does not issue an invoice in the above-mentioned deadline or it will be issued with a delay, the tax obligation arises upon the expiry of the deadline for its issuance, i.e. with the expiry of the payment deadline. The description shows that in the short-term rental agreement there will be no specific date for the payment of the rent, therefore in the case at hand, i.e. if the landlord does not issue an invoice, the quoted provision of Art. 669 § 2 of the Civil Code, according to which, if the date of payment of the rent is not specified in the contract, the rent should be paid in advance, i.e. when the lease is to last no longer than one month or if the contract was concluded for an indefinite period of time monthly, until the tenth day month. To sum up, in such a situation, the taxpayer should recognize the tax obligation to provide short-term rental services to a client who is a natural person not conducting business activity, in accordance with art. 19a paragraph. 7 of the VAT Act, i.e. on the date of commencement of the provision of short-term rental services.