Short-term apartment rentals: serious penalties for being non-compliant regarding holiday lettings websites!
Unknown a few decades ago, apartments rented out by private individuals specifically for tourists have now become a full-fledged alternative to hotels for countless people planning holidays or city breaks.
Airbnb, Booking.com, Trivago, Tripadvisor, Szállás.hu, Agoda. The names of these aggregator sites are well known to most, and over the last few years have become an almost unavoidable phenomenon for tourists seeking short-term rentals: even those who have not yet used them will have heard of them, as property purchases for short-term rentals are an increasingly popular real estate investment for the general public. One type of real estate investment is known as ‘house flipping’, where the investor – Hungarian or foreign – buys a dilapidated and run-down but under-priced home and renovates it. This is often followed by the short-term letting of the house or flat to tourists, especially if the property is in a prime tourist location. It may seem like a simple investment, particularly as certain forms of tax or simplifications in the Hungarian tax system expressively favour it. Many people choose to operate as taxable individuals, opting for the flat-rate personal income tax for the activities of taxable persons and the exemption from VAT.
Despite the „practical tax solutions” offered by the tax system, it is still easy to fall into the trap of simple mistakes, or failure to comply, and many people do not take into account the length of time it takes to process the tax. These errors and omissions, or overly-optimistic schedules, prevent or delay the timely initiation of proper operations, often putting the individual’s taxpayer-retailer activity at risk from several different tax perspectives.
What are the typical mistakes?
- Many people do not take into account the various tax and tourism-related steps that must be taken before registering with the municipality, or the length of time these can take. E.g., in the case of taxpaying individuals, the application for a tax number, registration with the National Tourist Information Centre (NTAK), the purchase of invoicing software (although Vendegem.hu is a popular and free(!) option which is particularly easy to use for private individuals), and the accommodation certification process can take up to a total of 2-3 months of administration!
- Most landlords – understandably – wish to operate under favourable tax conditions and generally opt for flat-rate taxation as a paying guest accommodation provider for their personal income tax and the individual exemption from VAT. However, they forget smaller but no less important taxes, such as building tax, tourism tax and the tourism development tax. (We note that the tourism development contribution has been suspended for the period from 1 October 2022 to 31 March 2023.)
- They postpone or neglect the implementation of Vendegem.hu, a site which is not only useful for tourism purposes, but also for dealing with the tourism tax.
- Due to the individual exemption from VAT and increased controls over aggregator operators (e.g., Airbnb, Booking, etc.), they do not consider themselves obliged to carry out invoicing tasks. They do not build up and use their billing systems properly.
- One consequence of the above is that they fail to file tax returns. e.g., not submitting a zero VAT return, or not submitting a Community recapitulative statement on amounts received from an aggregator in another Member State.
We hope the above is useful to you. Please feel free to contact us if you need any further information.
The K-X Consulting Team
The information contained in this blog post is for information purposes only. This information is not a substitute for professional advice and should not be relied upon as a basis for any decision or action without prior consultation with your advisor.