The EU has plans to bring providers of short-term accommodation into the VAT revenue net – this specifically affects owners who may, for example, own a holiday home in an EU member state which they rent out through an online platform site – such as Booking.com or Airbnb. It is likely that many online travel agents, holiday home-letting agencies and similar will also be treated as platforms.
These planned EU changes, which will now be discussed by the Member States, are planned to come into play from 1 January 2025. The intention is to stop the VAT inequality of treatment that has been created as more private/non-taxable individuals place their homes for rent in competition with VAT-registered providers such as hotels.
To bridge this inequality, the intention is to ensure that any “electronic interface such as a platform, portal or similar means” that facilitates the supply of “short-term accommodation rental” or ”passenger transport” by (amongst others) a non-established and unregistered person (i.e. non-EU person who’s not VAT registered already in an EU member state) will be deemed to be the supplier of those services and have to account for the VAT due in the EU on that supply.
In practical terms, this would affect a UK owner of a holiday home in France, Spain, or Italy for example, who places that home to let on the likes of Airbnb or booking.com or via many other forms of online agency. It does not mean that the UK owner will be required to register in the EU but it will mean that the rental income they generate will have EU VAT deducted from it by the platform operator before the balance of the proceeds are passed to the homeowner.
This planned change is specific to accommodation let through platforms and it is irrelevant as to whether the UK owner feels they are operating the letting as a business activity or not. The mere fact of being unregistered and supplying the letting through a platform will ensure their income is caught under these changes.
The current draft does not appear to affect owners who let their holiday properties outside of a platform but it should always be recognised that in some member states this activity undertaken in country would require a VAT registration to be put in place and local VAT accounted for in country.
We should not ignore the fact that these changes will also affect the business operations of the platforms themselves, so this is an issue that affects owners who own and let overseas homes in this way and also platform operators engaged in these activities. Importantly, the draft seems to mean that online travel agents, villa booking agencies and similar must be treated as platforms and will therefore be required to pay VAT in the EU if they sell EU accommodation in the circumstances described.
The planned changes do not discriminate on where the platform operator is based, it is where the holiday accommodation is situated that is key. UK platforms will be caught by this if they sell EU accommodation on behalf of owners who are not already paying local VAT on the revenue.
Further Travel changes ahead
We are still expecting more changes in the travel sector where non-EU-based tour operators are concerned. Croatia already seeks a Croatian VAT registration where travel packages are provided which includes in-country supplies and Germany announced that it too would follow this approach.
However, it is now confirmed that Germany is again deferring its proposed new rules for non-EU tour operators which were due to be introduced on 1 January 2023, this time to 1 January 2024. It would be wise for UK tour operators to ensure they are aware of what these planned VAT changes could cover as this is a deferral rather than an outright removal of the intention to seek to tax supplies which arise in Germany.
More generally, the European Commission is working on a package of measures to reform TOMS and it is likely that this will include a new approach to the treatment of holidays and similar sold by both EU and non-EU suppliers to achieve equality of treatment, but these changes are unlikely to come into effect before 2026.
Further UK Implications:
It should also be considered that these planned changes within the EU could be adopted by the UK Tax authorities as a way of creating more UK VAT revenues from platforms that manage UK based accommodation. Certainly an aspect to remain alert to, both for second home owners or platforms offering booking services for privately owned UK properties.
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