Czech Republic: Updated information on tax assessment obligations of accommodation service providers

The tax authority issued updated information on the tax assessment of the obligations of accommodation service providers, in connection with legislative changes in effect from January 2023 concerning value added tax (VAT), individual (personal) income tax, and real estate tax.

In light of judgments of the Court of Justice of the European Union (CJEU), the tax authority expressed its opinion that the difference between an accommodation service and the lease of immovable property must be determined based on what is objectively offered as part of the performance, regardless of how the parties involved qualify the arrangement, and that services mediated through internet platforms in most cases meet the characteristics of accommodation services.

In addition, regarding the place of supply and the person liable to declare tax, the tax authority stated that the obligation to declare tax may arise both to the accommodation provider (intermediation fee) and indirectly to the guest staying (fee for using the internet platform). It is therefore necessary to examine who in effect the recipient of such services is as well as the nature of the service. If the service recipient is a VAT payer, the obligation to declare tax is on this person. If the recipient is a taxable person who is not registered as a VAT payer, such a person becomes a person identified for VAT on the date of receipt of the service. Only where the recipient is a non-taxable person will the intermediary platform itself pay the tax on the service on that person's behalf.

The tax authority stated that from the individual (personal) income tax perspective, it is essential whether the provision of accommodation meets the characteristics of business activity (i.e., independent performance of gainful activity on one's own account and liability as a trade or in a similar manner with the intention of doing so consistently for profit). If this is the case, the income is then subject to tax as income from independent activity. If the accommodation provider does not claim expenses in their actual amount, they may claim expenses as a percentage of income (60% or 40%, depending on whether they hold the relevant trade license). If a natural person meets the conditions laid down by the Income Tax Act, they may also enter the lump-sum tax regime.

If accommodation services are provided by a legal entity, income from accommodation services must be declared in their corporate income tax return.

If accommodation services are provided in an immovable property, the property will be subject to the relevant real estate tax rate set for business activity (CZK 10 per m2 of built-up or floor area). A taxable unit/building is considered to be used for business even if unoccupied on 1 January of the taxable period.

Read an April 2023 report prepared by the KPMG member firm in the Czech Republic