La rental of premises used for’furnished or unfurnished, is not subject to VAT. However, there are some exceptions to be aware of if you don't want any nasty surprises.
When is furnished letting subject to VAT?
If you are able to offer, on request, at least 3 of the 4 types of service listed below, the hire may be subject to VAT.
There are 4 types of ancillary hotel services :
- Supply of breakfast
- Supply of household linen
- Cleaning regular cleaning of the premises
- Home personalised customer service
If you do not invoice these services separately, the rental price that includes the hotel services is subject to VAT. If these services are invoiced separately, the rental price will not be subject to VAT. However, you will have to charge VAT on the ancillary services.
What does it mean to be subject to VAT?
Being subject to VAT means that VAT at the rate of 10% must be applied to the rental price and all integrated ancillary services. This VAT is called output VAT. It must be paid to the government.
In return, you can deduct the VAT you pay on expenses relating to the rental. For example, VAT paid on the purchase of bed linen or food for breakfasts. This VAT is known as deductible VAT.
Depending on your situation, you will have to pay the VAT due to the government on a monthly, quarterly or half-yearly basis.
What are the exemptions?
However, if over the course of a calendar year, your income from furnished rentals are less than 91 900€, you are automatically covered by the basic deductible. This means that you are not subject to the VAT. The counters are reset to zero every 1er January.
You should keep a close eye on the amount of turnover you generate. If you exceed the basic exemption threshold for 2 consecutive years, you will have to declare VAT. Please note that if your sales exceed €101,000 in a calendar year, you will immediately be liable for VAT.
To find out more about how the VAT threshold is exceeded, see our article
