Understand the VAT applicable to residential rentals in France

The principle: VAT exemption for furnished rentals

In terms of VAT, the general rule for rentals of furnished accommodation intended for housing is exemption. This is what Article 261 D of the French Tax Code (FTC) provides. This exemption, which aims at not taxing the basic need for housing, applies without the possibility of opting for taxation (Administrative Doctrine - BOI-TVA-CHAMP-30-10-50).

However, there are important exceptions to this principle. Some accommodation services, due to their commercial nature and the services that accompany them, are obligatorily subject to VAT. It is therefore essential to clearly distinguish between situations in order to secure your operations.

Hotel and parahotel accommodation: an activity subject to VAT

The first major exception to the exemption concerns accommodation services provided in the hotel sector or in sectors with a similar function, often described as “parahotels”. For the rental to be taxed, two cumulative conditions must be met: the duration of the proposed stay and the provision of specific ancillary services.

Who is considered to be a provider?

The VAT regime applies regardless of the legal status of the service provider (classified hotel, bed and breakfast, tourist residence, furnished apartment rental, etc.). What matters is who assumes operational risks and acts in its own name in relation to customers.

If an intermediary (a management agency, for example) acts in the name and on behalf of the owner, it is the owner who is the service provider. On the other hand, if the intermediary assumes the risks himself or contracts with customers on his own behalf, he becomes the provider liable for VAT.

The condition of length of stay

The accommodation service is taxable if the operator offers stays whose duration can be, at the customer's choice, less than or equal to thirty days. The key criterion iscommercial offer of the operator, as it appears on its website, reservation platforms or any other medium.

Even if a customer decides to stay longer than 30 days, the service remains subject to VAT as long as the possibility of a shorter stay was offered. On the other hand, a service provider that only offers quarterly rentals does not meet this condition.

The condition of ancillary services

This is the most technical and the most studied condition. To be subject to VAT, the accommodation service must include, in addition to the provision of furnished premises, at least three of the following four services :

• The provision of breakfast : The service must actually be offered, whether in the home, in a common room or even via an order service from a partner (bakery, etc.). A simple provision of a vending machine, a kettle with a few tea bags or a non-renewed welcome basket is not enough.
• Regular cleaning of the premises : Cleaning must be done before the customer arrives and offered on a regular basis during the stay. Jurisprudence and administrative doctrine consider that a weekly rhythm is sufficient to satisfy this criterion. The simple provision of household equipment (vacuum cleaner, products) is insufficient. The service must be offered even if the customer refuses it.
• The supply of household linen : Linen (sheets, towels, tea towels) must be provided at the beginning of the stay and must be renewed regularly. As with cleaning, a weekly renewal is considered sufficient. Providing a washing machine does not replace the laundry renewal service by the operator (CAA Lyon, April 3, 2014, No. 12LY20317).
• Customer reception : There must be a reception service, even if not personalized and not permanent, for the delivery of keys, the presentation of the premises and assistance during the stay. It can be provided physically over defined time slots, or by means of remote communication (telephone, secure key box system with clear instructions and reachable assistance, etc.).

These services should be actually offered to the customer, whether included in the price or optional. The operator must be able to prove that he has the necessary means to provide them (contracts with service providers, staff, etc.).

Furnished rentals for residential use with services

A second category of furnished rentals is necessarily subject to VAT: rentals in residential use which are accompanied by services similar to those in the parahotel sector (the b bis of 4° of article 261 D of the FTC).

These rentals are distinguished by their vocation for a more permanent occupation, often materialized by a lease lasting more than one month (1989 law or similar contract). This applies in particular to assisted living, student residences, senior residences or even “coliving” homes.

To be taxed, these rentals must also offer at least three of the four services mentioned above (breakfast, cleaning, laundry, reception).

Renting to a taxable accommodation operator

Section c of 4° of article 261 D of the FTC provides for a final case of taxation by operation of law. If you rent premises (even naked) to a person who, in turn, uses it for a taxable accommodation activity (hotel, parahotel or residential with services), your own rental is automatically subject to VAT.

This mechanism ensures the neutrality of the tax throughout the chain. Taxation applies even if the customer (the operator) is an entity that would normally be exempt from VAT for its other activities (an association, a communal social action center, etc.).

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