VAT and Hotel Real Estate: Our analysis of the “Val Thorens” case law in Lamy's Tax News

In this contribution, we come back in detail to a major judgment delivered by the Council of State on 8 October 2025 (Val Thorens Le Cairn Society), which is changing established VAT practices for rentals granted to hotel operators.

The end of the practice of “ventilation”?

Until now, when a building complex rented to a hotel operator included ancillary spaces (in particular staff accommodation), administrative and market practice often consisted in breaking down the rents:

• Full VAT on the tourist accommodation part;
• Option for VAT or exemption on ancillary or residential areas.

This method complicated the management of leases and sometimes weakened the rights to deduct VAT for the lessor.

The consecration of the unique complex operation

In our article, we analyze how the Council of State validated an approach that was much more favorable to investors. The High Court now considers that the rental of a real estate complex, even if it includes separate premises dedicated to staff housing, constitutes a single operation.

Since these premises are inseparable from the main operation (necessary for the holiday village activity for example), the entire rental follows the tax regime of the hotel activity.

In practice, this leads to other questions:

• the rate applicable to the transaction;
• the customer's deduction rights.