The government has just issued an amendment n°5374 to the draft Finance Bill for 2024 aimed at clarifying the VAT regime applicable to the para-hotel and serviced residences sector, following the Administrative Supreme Court opinion of July 5, 2023 declaring this regime partially non-compliant with the EU VAT Directive.
- The amendment distinguishes between three sectors :
- The hotel sector, whose VAT regime would be unchanged and applies to traditional hotels.
- The sector with a function similar to the hotel sector, whose VAT regime would be subject to compliance with the following two cumulative conditions:
- a duration of accommodation not exceeding thirty nights (renewable). This is a new condition that exists in other European countries (e.g. Belgium and Germany, where a stay of less than three months is required); and
- furnished premises with three of the following four services: breakfast, regular cleaning of the premises, supply of household linen and reception of customers, even if not personalized. These services are regularly the subject of case law decisions clarifying their scope.
This category includes inns, tourism residences (holiday resorts in particular) and "Airbnb"-type furnished tourism accommodation.
- A new sector other than the previous two, that of furnished accommodation for residential use, which would be subject to VAT if three of the above-mentioned services are provided. This new category covers managed residences, including student and senior residences, as well as co-living facilities, in a context of uncertainty brought about by the Administrative Supreme Court ruling that put operators of this type of residence at risk.
Rental by owners to operators of such establishments would remain subject to VAT by right, and the intermediate 10% VAT rate would continue to apply.
If passed, this welcome amendment will make the practices of managed residences, such as student or senior residences, more secure, and should ensure equal treatment for these different types of operation. Tax authorities will have to clarify the conditions under which services are provided, in order to give taxpayers even greater certainty in an environment of fluctuating case law.
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