Short-term rental is a popular form of earning income from real estate, especially among people with vacant flats, houses or rooms. However, in order to avoid tax problems, it is essential to understand the rules and correctly account for the income from this.
Below you will find a guide to help you account for short-term rentals correctly.
What is the difference between a rental and an accommodation service?
Rental
A rental is the provision of a property for an extended period of time, usually at least a month or more. In a lease, the landlord makes the property available for use, without additional services such as cleaning or changing the bedding. Rental can be provided either privately or as part of a business.
Accommodation service
An accommodation service is the offering of accommodation for a short period of time, usually for days or weeks. In addition to the accommodation itself, the owner often provides additional services such as towels, bed linen, internet access, television and even cleaning. This type of activity is considered a business and requires proper tax accounting.
How to account for short-term rental income?
Proprietorship
If you offer your properties on portals such as Booking.com or Airbnb, you are providing accommodation services, which requires the establishment of a business. The income from such activities must be taxed as business income.
Forms of taxation:
- General PIT rules: Income is taxed according to a tax scale (12% and 32%).
- Linear PIT: Fixed tax rate of 19%.
- Recorded income lump sum: The rate is 17% for accommodation services.
VAT:
If your annual revenue exceeds 200,000 PLN, you become an active VAT payer. Accommodation services are taxed at a rate of 8%. Please note that Booking.com and Airbnb are invoiced from other EU countries and this is an import of services, so you must register for VAT-EU.
If your annual revenue exceeds 200,000 PLN, you become an active VAT payer. Accommodation services are taxed at a rate of 8%. Please note that Booking.com and Airbnb are invoiced from other EU countries and this is an import of services, so you must register for VAT-EU.
Private rental
If you sign a rental agreement with a real estate agent who will advertise on portals, you can treat your income as private rental income and tax it with a lump sum from registered income (8.5% up to PLN 100,000 and 12.5% above that amount).
Tax obligations
Registration of a business
If you provide accommodation services, you must register your business. The registration process is simple and can be done online via CEIDG.
Fiscal cash register
When providing accommodation services to non-business individuals, it is necessary to have a cash register and issue receipts. However, there are exemptions that are worth finding out about.
Social security contributions
When you are running a business, you have to pay contributions to the Social Security and the National Health Fund. These contributions include social security and health insurance.
New legislation - DAC7 Directive
From 1 July 2024, the DAC7 directive came into force, which obliges online portals to provide data on people offering properties.
The tax office will receive information such as name, address, tax identification number, rental income, rental period and more. With this data, officials will be able to easily verify the correctness of tax settlements.
What to do if you have made a mistake?
If you have accounted for your short-term rental income as a private rental and you should as a business, contact your tax adviser.
You may need to correct your tax returns and pay the outstanding tax plus interest. In the event of an audit, the tax office may demand a tax surcharge and impose additional penalties.
Summary - How to account for short-term rentals
Accounting for short-term rentals requires a thorough knowledge of tax legislation and proper record-keeping. Registering your business, taxing your income appropriately and complying with VAT and Social Security obligations are key to avoiding problems with the tax authorities.
If in doubt, it is advisable to consult a tax adviser to ensure that everything is in order.
If you are looking for a professional short-term rental management company, contact us to find out more about how we can help you with your short-term rentals.
