VAT Liability and Loss Imputation in Furnished Short-Term Rentals

Extract

[...] In this context, they also censure the Bordeaux Administrative Court, which justified the exemption from VAT on the grounds that the breakfast service was subcontracted. Furthermore, they recall the imperative need to base decisions on factual elements and to ensure a dense argumentation in order to avoid censuring judgments in the absence of sufficient motivation. In fact, by limiting itself to citing situations without providing tangible evidence, the Court has insufficiently motivated its decision. The judge of first instance specifies that the court does not respond with sufficient precision to the arguments of the applicant. [...]

[...] Several Courts of Appeal have already ruled that its provisions are in line with community law. The judges of first instance censured the judgment of the Bordeaux Administrative Court by recalling that it is indispensable to provide factual, objective, and sincere elements in order to appreciate the reality of the facts as closely as possible. They also recall the importance of providing evidence-based justifications by the applicant for the assessment of the criteria. Furthermore, by requiring justifications to be provided and interpreting the criteria broadly, the judges of first instance allow the competent tax authority to assess the factual situations, to exercise discretion in qualifying the nature of the activity. [...]

[...] A presented a contentious claim to the tax administration to obtain the reimbursement of VAT credit. This was rejected by the administration as part of a accounting audit. During the procedure, the imputation of losses on Mr. A's total income, arising from this activity, was also rejected. His requests to the administrative court of Toulouse and to the administrative court of Bordeaux were successively rejected. With regard to VAT, Mr. A asserted that the conditions mentioned in Article 261 D-4°-b of the General Tax Code were met and that, as such, his activity was subject to VAT. [...]

[...] A only asks the judge of first instance to assess the interpretation of the criteria listed in article 261 D-4°-b of the CGI. The judge of first instance rejects Mr. A's request on the grounds that the reality of the four conditions mentioned in article 261 D-4°-b of the CGI is not fulfilled. Regarding the imputation of losses on the global income, it is necessary to assess the same facts in the light of the provisions of paragraph 1° bis of article 156 of the CGI. [...]

[...] In this judgment, the judge must assess the criteria that allow distinguishing a rental activity from a hotel activity in terms of VAT and loss imputation It confirms the importance of the bundles of evidence giving probative value to the appraisal criteria (II). Qualification of the furnished rental activity and the accommodation activity in the light of fiscal law 1-1 The criteria defined in Article 261 D,4° of the CGI must be given a broad interpretation for VAT liability. The legislator has established the principle of exemption from VAT for occasional, permanent or seasonal rentals of furnished accommodations, but subjects to VAT the provision of accommodation services rendered for consideration and on a regular basis, provided that this activity is carried out in conditions similar to those of hotel and para-hotel activities. [...]