Indirect Tax News - October 2022

New VAT rules for hotel services and rental of furnished accommodation

On 1 July 2022, a new regulation on the VAT treatment of the provision of furnished accommodation became effective in Belgium. The regulation, which applies to bookings made as from that date, makes a distinction between hotels and motels and “establishments with a similar function” (e.g., B&Bs, recreation parks, student accommodations, etc.) and clarifies when such accommodations are subject to VAT.

The rental of immovable property is generally exempt from VAT in Belgium, but one of the multiple exceptions to this rule applies to furnished accommodation in hotels and motels, which is subject to VAT at the reduced rate of 6% if the stay does not exceed three months. If the stay or consecutive stays exceed three months (e.g., in the case of a long-term lease of an apartment or a suite in a hotel), the VAT exemption for leases of immovable property will apply. The rental of all other furnished accommodation also must meet this quantitative criterium (i.e., a maximum duration of three months). This will mean, for example, that operators of student accommodations (which are considered establishments with a similar function) will not be able apply VAT on the rental of furnished student rooms that include hospitality services (and  recover VAT on their investments and costs). The provision of short-term accommodations ( e.g.., B&Bs, landlords of furnished mountain cottages or seaside apartments) by establishments with a similar function will be subject to VAT if the paid stay is less than three months and if at least one of the following “complementary services” (qualitative criterium) is offered:

  • A physical reception area (including on-site assistance to guests);
  • Supplying household linens to guests (at least once per week); or
  • Providing daily access to breakfast.

It is no longer necessary that the complementary services be included in an “all-in” price, i.e., it is possible to charge a supplement for the complementary services and other on-demand services. However, if a paying guest has the option to purchase the complementary service(s), the condition will be fulfilled only if the guest specifically opts for, effectively enjoys and pays for this service. Other supplies or services (e.g., cleaning, bike rentals, sauna or spa use, etc.) can be offered separately and will follow their respective VAT treatment; however, these additional supplies or services will not (be sufficient to) affect the VAT treatment of the main service.

Pascal Dauw