Since the media are full of the debate accompanying the fast-approaching and (unfortunately for many) unstoppable introduction of Electronic Records of Sales (ERS), it was almost impossible for our readers to fail to register the fact and they might have got a bit confused and lost in the jungle of biased political outbursts of feuding rivals of both ardent supporters and zealous dissenters of the scheme.
The pieces of information have, so far, been numerous and ranging from short notices to special editions of quality newspapers, and they have mainly concerned the businesses that are the first to be affected by the obligation to register the sales – i.e. those that provide services in the area of hospitality industry.
Let’s ponder on what ‘hospitality’ means in the view of the ERS and focus on the ‘accommodation’ aspect of the term. As the official Financial Administration website defines it, it is “mostly short-term accommodation, hotels, camping sites, pensions, hostels, lodging houses…”; yes, the three full stops are really there – does it mean that they replace the fast-spreading and more-and-more-popular becoming accommodation know as AirBNB, perhaps? For those of you who are concerned we are bringing a short overview to provide a short insight into the problem.
The main question is, then, does AirBNB meet the decisive requirements to be included into the ERS? There are three key (albeit a bit simplified) aspects to look at:
1) Do other services accompany the accommodation?
2) Do the accommodation provider and the accommodated sign a written contract of lease?
3) Is the payment for the services performed in cash, by card or by bank transfer?
We shall address each of the above one by one and explore them in detail.
As property owners might be well aware, the renting a property is taxed in accordance with ‘Income from Lease’ Section of the Personal Income Tax Act on condition that the lease is ‘bare’ – i.e. without any additional services and accessories. In other words, cleaning after the clients have left, providing them with refreshments and e.g. towels is seen as provision of a service – it is, in all fairness, rather uncommon for landlords to wash the dishes for their tenants, do their laundry and prepare breakfast for them. In this sense, AirBNB is closer to accommodation service rather than to a ‘bare’ lease and as such ought to be taxed under the conditions of ‘Income from Independent Gainful Activity’ Section of the Personal Income Tax Act which the ERS obligation applies to.
The answer to the second question follows similar logic – in the case of AirBNB, it is highly uncommon for both parties to sign a written contract of lease, and as absence of such a written contract is one of typical signs of “short-term lease” (as is the case of staying overnight at a hotel – the guest does, in a way, enter into a contractual relation, which is, however, more of agreement with the terms of accommodation rules and acceptance of the specific conditions of the stay), the AirBNB system appears to fit the definition of accommodation service since the communication between the guest and the provider is performed via AirBNB website. So far, the situation for flat owners organised under AirBNB does not look excessively optimistic.
We can only hope that the answer to the last question gives us a chance… the author of this text needs to be frank and admit that in search for building some suspense, he intentionally examines the aspect of the payment for the service as the last one although it ought to be the other way round since it is, in fact, the first criterion to be looked at when considering whether the obligation of ERS applies. As the official source of information, the Financial Administration website, states, the “recorded sales are such sales which
1) Meet the formal requirements, i.e. the payment is performed in cash, by credit card or another similar way, and also
2) founds a decisive income.
And both aforementioned conditions are to be met. Point 2) seems to be satisfied – the rather cumbersome wording (which is a real mindbender even for a person well-versed in legal jargon) covers the two questions we have discussed above. But does the AirBNB system “meet the formal requirements” of the payment being “performed in cash, by credit card or another similar way”? All exegetical interpretations raging from pub talks to mythical fairy tales generally agree that payments performed by means of “a bank account transfer do not meet the formal conditions of electronic records of sales” (as our favourite financial administration website has it).
The conclusion is, then, as follows – if you provide accommodation via AirBNB system, the income sales need not to be registered in the ERS… It does, of course, happen rather often that the client is so excited with the rented flat that they decide to stay a bit longer and pay for this prolongation in cash or by card – naturally, the ERS applies. There are, however, solutions which we believe the reader of this text will surely be able to come up with themselves…
And a last note to wrap the issue up – the fact that the ERS does not apply does NOT mean that the income is not to be recorded at all! The income is, of course, subject to personal income tax. We are sure that all accommodation providers are well aware of that and they do declare all of them as they all wish to “straighten out the business environment” (as MR Babiš, the Finance Minister defends the ERS scheme) in the Czech Republic as soon as may be…