On 19 August 2021, the Municipal Court in Prague issued an interesting judgment (case ref. 6 Af 20/2020) in which determined that short-term rentals of real estate through platforms such as Airbnb do not represent a lease of real property but constitute the provision of accommodation services.
In its judgment No. 6 Af 20/2020 of 19 August 2021, the Municipal Court in Prague decided that in the case of short-term rentals carried out through various platforms such as Airbnb or Booking, the relationship between the accommodation provider and the client is not a relationship whose purpose is to satisfy housing needs “across the entire complex of ensuring the needs of a person both in the material and spiritual realm”, but which merely serves to satisfy a short-term need for accommodation. Therefore, this relationship does not resemble tenancy, but is closer in nature to the provision of accommodation services.
This conclusion was supported in particular by the fact that it is a continuous activity carried out for profit, of a short duration usually lasting only a few days, by the basic platform requirements for accommodation providers in terms of the provision of “services” expected by guests (e.g. toilet paper, soap or linen for each bed, etc.) and by the regular cleaning ensured by the accommodation provider. However, the possible absence of these additional services need not in itself be a decisive factor; even a so-called ‘barebone rental’ may count as provision of accommodation services.
The above-described judgment is compatible with the judgment of the Court of Justice of the European Union (i) of 12 February 1998 in C-346/95 Elisabeth Blasi against Finanzamt München I, from which it follows that the short-term character is a typical feature of ‘business rentals, though other circumstances must also be taken into account’, and (ii) of 4.10.2001, Case C-326/99 Stichting ‘Goed Wonen’ against Staatssecretaris van Financiën, according to which accommodations arranged through an internet platform can be regarded as accommodation services rather than lease relationships.
One may expect this decision to have impact not only in the area of tax, especially with regard to VAT and, retroactively, also the solidarity tax, but especially in the area of social and health insurance: while rental income is not subject to social security, income from the provision of accommodation services (as a business operation) very much is, and there arises therefore the risk of their retroactive assessment, including the imposition of penalties.
Although the aforementioned decision of the Municipal Court in Prague is not final as of today, since a timely cassation complaint was filed against it which is currently being heard before the Supreme Administrative Court under case No. 5 Afs 273/2021, it is another stepping stone which, together with the instruments available to HOAs, could help improve the current unfortunate situation on the real estate market.
Judgment 6 Af 20/2020