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This article examines the decision of the Third Chamber of the Council of State dated 14.04.2025 on the tax character of short-term residential rentals made through Airbnb and similar platforms. The decision establishes that short-term rentals with no ancillary service element cannot be characterised as a commercial activity, and clarifies the distinction between the approach long adopted by the tax administration and the judicial assessment.
Short-term residential rentals made through Airbnb and similar platforms have in recent years occupied the agenda of both taxpayers and the tax administration. Determining the legal nature of the income derived from renting out properties on a daily, weekly or monthly basis, and the question whether that income is to be taxed as commercial income or as income from immovable property, have caused considerable uncertainty in practice. The divergence between the approach the tax administration has long maintained and the judicial assessments has become more visible with the decision of the Third Chamber of the Council of State dated 14.04.2025.
The Finance Authorities' Assessment and Their Approach in Practice
The tax administration has long treated short-term rental activities as commercial income. According to the administration, keeping properties available for use by different persons on a daily, weekly or monthly basis, the frequent turnover of rental periods and the need to prepare the dwelling again between each use mean that, by its nature, the activity requires an organisation. For this reason, an administrative interpretation has emerged to the effect that the income earned by natural persons who engage in short-term rentals, whether through the Airbnb system or individually, must be taxed under the provisions on commercial income.
In line with this approach, the tax administration proceeded on the basis that taxpayer status should be established on account of these rental activities, and carried out retroactive assessments against many persons engaged in short-term rentals, imposing income tax and VAT. This practice has given rise to significant controversy for natural persons engaged in short-term rentals, and the matter has been brought before the courts.
The Council of State's Approach: The Service Element Is Decisive in the Character of the Income
The decision of the Third Chamber of the Council of State dated 14.04.2025, Docket No. 2024/6160, Decision No. 2025/1856, has put forward a different understanding in determining the tax character of short-term rentals. The decision emphasises that, for income derived from a short-term rental to be regarded as commercial income, the rental must be carried out within a commercial organisation resembling the operation of a hotel, an apart-hotel or a guesthouse. In this context, the provision of ancillary services such as breakfast, meals, ironing and daily cleaning is accepted as capable of showing that the activity is carried out within the framework of a commercial business organisation.
What the decision regards as the real determining factor is that renting out a property for short periods merely in order to earn more income is not, on its own, sufficient for it to be characterised as commercial income. In short-term rentals made without an ancillary service element, the nature of the activity remains that of a lease agreement, and no service is provided beyond the transfer of the right to use the property. For this reason, the decision of the Third Chamber of the Council of State dated 14.04.2025, Docket No. 2024/6160, Decision No. 2025/1856, states that the income derived from the activity in question must be treated as income from immovable property rather than commercial income. Income from immovable property refers to passive income earned in return for renting out an immovable, which carries no element of commercial or professional organisation.
The decision clearly sets out the distinction between the manner in which income is earned and the nature of that income. The fact that a rental is short-term, that the transaction is repeated frequently or that the income is relatively high does not, on its own, demonstrate the existence of a commercial organisation. For a rental activity to be characterised as commercial income, the activity must by its nature be carried out in a structure resembling the operation of a hotel or guesthouse, and ancillary services such as breakfast, cleaning, ironing and meals, etc. must be provided. The decision identifies as the determining factor the assessment that, where there are no ancillary services or no structure resembling the operation of a hotel or guesthouse, the income must be accepted as income from immovable property.
Conclusion and Assessment
The spread of short-term rentals made through Airbnb and similar platforms also brings new problems of interpretation in tax law. The aforementioned decision of the Third Chamber of the Council of State constitutes a guiding precedent in the debate on determining the tax character of income derived from short-term rentals. According to the decision, short-term rentals with no ancillary service element do not constitute commercial income; the income derived from these activities is to be assessed as income from immovable property. This approach constitutes a judicial assessment that must be taken into account in similar disputes, and narrows the tax administration's room for interpretation on the subject.
