Taxation of income from real estate rented on an internet platform

Taxation of income from real estate rented on an internet platform

The income generated from real estate rented by an individual on an Airbnb-type platform may, depending on the duration of the rental, fall under either the taxation of private income or the taxation of professional income.

Occasional rentals on a platform such as Airbnb

Occasional rental of accommodation on a platform such as Airbnb does not have any particular consequences and the income from rented accommodation is taxed as property income.

Usual rentals on a platform such as Airbnb

Regularly renting accommodation on an Airbnb-type platform carries numerous tax consequences, but also prior obligations such as the obligation to obtain a business license and registration with the Luxembourg Business Registers.

The law deems commercial the activity which consists of renting furnished accommodation for more than 90 nights per year to passing customers, who do not fix their residence and who carry out a stay there characterized by rental by the day, by the week or monthly.

Therefore, the owner (individual, etc.) who rents his property for more than 90 nights per year to a passing clientele must apply for and obtain a business license, and, as a result of his commercial activity, also register in the Luxembourg business register.

From a tax perspective, income from the commercial rental of real estate will no longer be treated as property rental income but as commercial profit, with the obligation for appropriate accounting.

For VAT purposes, this accomodation activity in the permises that the owner reserves for the temporary accomodation of persons confers on the owner the status of VAT taxable person (since it is an independent economic activity), with the obligation to register with AED (VAT Administration) and to subject the rentals to VAT² at the rate of 3%³ from the moment the amount of € 35.000,00 of annual income is reached (or the first euro of income when the owner of the accomodation is not a Luxembourg resident). The VAT on purchases directely related to the accomodation (goods or services), made by the owner, is then deductible.

1. July 26^th, 2023 act updating September 2^nd, 2011 Act which regulates such as craftpersons, shopkeepers, industrials and some professional activities.

2. VAT updated Act of February, 12^th, 1979. Art. 44-g

3. VAT updated Act of February, 12^th, 1979. Annex B "List of super reduced VAT rate for goods and services"