Globalization and the digitalization of the economy have considerably transformed consumption patterns and commercial transactions, particularly in the tourist accommodation sector. Online booking platforms such as Airbnb, Booking.com and Expedia now play a central role. This development raises complex questions, particularly in terms of value added tax (VAT).
European legislation determines the territoriality of VAT on these services. According to the basic principle, it is generally due in the country where the client, in this case the host, is established. However, the application of these rules may vary depending on the tax situation of the host and the location of the parties involved.
This study aims to recall the principles of exemption or taxation from VAT for furnished rental companies and, then, to present the rules for taxation of services provided to a host located in France by a platform whose headquarters is abroad.
I – The principles of VAT taxation of furnished rentals
Furnished rentals, subject to specific VAT rules, may benefit from exemptions or be subject to taxation depending on certain conditions.
1 – VAT exemption
Furnished rentals are generally exempt from VAT without the possibility of an option. This exemption applies in particular to rentals of accommodation for primary, secondary or occasional residential use, provided that the lessor does not offer extra-hotel services. These services are as follows:
- breakfast;
- regular cleaning of premises;
- the supply of household linen;
- customer reception.
2 – VAT taxation
Furnished rentals become taxable for VAT when the lessor offers at least three of the four aforementioned para-hotel services. In this case the rental is necessarily subject to VAT.
II – The tax definition of services provided by booking platforms
These services are called “Transparent intermediaries”.
Here is the definition of a transparent intermediary:
In his relations with co-contracting third parties (customers, vacationers, etc.), the intermediary acting in the name and on behalf of others clearly appears as the representative of the principal (for example of the hotel for which he registers reservations).
The same applies to the intermediary who contracts personally with the third party when:
- the contract expressly mentions that it acts in the name of the host: this condition is only met if the contract indicates the name or company name, the address as well as the taxable person number of the host in this which concerns intra-community operations for which communication to the client of this information is planned;
- in the absence of a written contract, the invoice is established directly by the host. If the invoice is issued by the booking platform, it must show that it is acting on behalf of the host;
- in the absence of an invoice (operations carried out with non-taxable persons), the legal circumstances (in particular the examination of the clauses of the contract uniting the platform and the host) make it possible to establish that the client was aware of the fact that the intermediary acted on behalf of others.
In cases where your activity as a rental of furnished accommodation, B and B, hotel or other is in relation with a reservation centre acting under other conditions, the VAT regime could turn out to be different. Contact us if necessary to obtain our opinion!
Transactions carried out by transparent intermediaries acting in the name and on behalf of others are considered as services and are subject to all the corresponding rules.
The territorial regime for these services differs depending on whether they are provided for the benefit of taxable persons or non-taxable persons.
In relations between taxable persons (B to B), the general principle of territoriality of service provision is applied. In this case, the service is taxable in the country of establishment of the customer, that is to say in France when the taxable customer has the seat of his economic activity, a permanent establishment or his domicile in France.
A different regime applies to services provided by a transparent intermediary for the benefit of non-taxable persons. The place of services provided (i.e. of VAT taxation) to a non-taxable person by an intermediary acting in the name and on behalf of another is the place where the main transaction is carried out (i.e. in France when the accommodation is provided there).
III – Rules regarding VAT billing by foreign platforms
1. Applicable VAT rate
The Official Tax Bulletin (BOI-TVA-CHAMP-10-10-40-40) indicates: “The operations carried out by these intermediaries are, for VAT purposes, considered as independent services. These services follow their own regime, particularly in terms of rates, independently of the VAT regime of the supplies or services provided by the company.“
This means that the VAT rate on the reservations platform’s commission is always 20% even if it concerns the rental of hotel rooms taxed at a lower rate or a furnished rental exempt from VAT.
2. Services provided to rental companies subject to VAT
Pursuant to Article 259, 1° of the CGI, the place of services is located in France when the lessee (the hotel host or lessor providing hotel services) has in France the headquarters of its activity, a permanent establishment or, failing that, his habitual residence for which the services are rendered.
The service provider checks the place of taxation based on information provided by the customer such as the VAT identification number.
This means that, when the services are provided by a service provider not established in France, the tax must be self-liquidated by the customer (the host) at the time this service is performed (in practice upon receipt of the statement).
VAT declaration: The tax due is self-liquidated by the host on its turnover declaration (for non-payable taxable customers, it is obligatorily self-liquidated on a CA 3 form).
The amount excluding tax of services provided by a service provider established in another EU Member State or outside the EU must be declared on a specific line of the declaration “Purchases of services made from a taxable person not established in France”.
This VAT paid is deductible under common law conditions, i.e. non-recoverable in the event that the declarant is not subject to VAT.
3. Services provided to VAT-exempt rental companies
In this case, the place of VAT taxation is that of the place of supply of housing (location of the building). The service will therefore be subject to French VAT if the building is located in France.
Thus, the foreign service provider (reservation platform) must identify itself for VAT in France or appoint an agent if it is a company with its headquarters in the EEC, or identify itself for VAT in France and appoint a tax representative if it is a non-EEC company.
Thus, the reservation centre must invoice the applicable VAT on its services to its client.
Whatever your situation, we are here to guide you: don’t hesitate to tell us more!
