Like every year, on the last day of the year a number of amendments to the law are published in our Belgian Official Gazette. This happened last December as well. In this BofiFlash, we highlight the VAT exemption for the provision of furnished accommodation.
The rental of property is in principle exempt from VAT (based on article 44, § 3, 2° of the VAT Code). However, the legislator has provided a number of exceptions to these exemptions, in particular the provision of furnished accommodation in hotels, motels and establishments with a similar function where paying guests are accommodated. These services are therefore subject to VAT but may benefit from a reduced VAT rate of 6%.
In addition to this qualitative condition, a quantitative condition is now being introduced. The amendment of article 44, § 3, 2°, a), third bullet of the VAT Code limits the exception to the VAT exemption for furnished accommodation significantly.
It is no secret that the legislator wishes to put an end to the discussions of the last few years regarding the qualification of the rental of certain immovable property as furnished accommodation. More specifically, to exclude the mere provision of holiday homes and student rooms from the application of VAT, and to avoid the deduction of VAT on the incoming supply of goods and services, and in particular the costs related to the construction of the real estate complexes.
The new regulation means that any property
that is rented out for a period of 3 months or more remains eligible for the VAT exemption.
If the furnished premises are rented out for a period of less than 3 months, a distinction must now be made:
- For recognized hotels and motels, where the service is always subject to 6% VAT;
- For “establishments serving a similar function” – e.g. holiday homes. Here, the 6% VAT applies if at least one of the following services is provided: the physical reception of guests, the provision of household linen and, when the furnished accommodation is provided for a period of more than one week, the replacement of the household linen at least once a week, and the daily provision of breakfast.
It goes without saying that the three-month period cannot be avoided by concluding ad hoc agreements of a short duration, renewed between the same parties for the sole purpose of being able to levy VAT.
If the same accommodation is made available by means of consecutive contracts of a short duration (less than three months) between the same parties, the total duration is taken into account.
The amendments to the law do not affect the reduced rate of 6%.
Please note that even those who have concluded a ruling in the past cannot rely on it any further, a ruling loses its validity.
This measure will enter into force on 1 July 2022.
Our Bofidi experts are happy to help you
Do you have specific questions about the changes to these VAT rules? Do not hesitate to contact us. Our team of Bofidi experts will be happy to help you.