On 7 August 2024, the French tax authorities updated their administrative guidelines relating to the VAT treatment of the “parahotel” sector to clarify certain aspects of the rules.
Following a 2023 decision of the High Court (Conseil d’Etat), article 261 D of the French Tax Code was amended to bring the VAT regime for parahotels in line with the EU VAT Directive, with the new rules applying as from 1 January 2024.
Based on these changes, parahotel accommodation services are subject to VAT if they do not exceed 30 nights and include at least three of the following ancillary services: the provision of breakfast; regular cleaning; the provision of linens and towels; and a customer reception (regardless of whether it is in person).
The revised administrative guidelines provide important clarifications on the duration of a stay and the provision of ancillary services, both of which are essential in determining whether parahotel services are subject to VAT:
David Hirsch
BDO in France
Following a 2023 decision of the High Court (Conseil d’Etat), article 261 D of the French Tax Code was amended to bring the VAT regime for parahotels in line with the EU VAT Directive, with the new rules applying as from 1 January 2024.
Based on these changes, parahotel accommodation services are subject to VAT if they do not exceed 30 nights and include at least three of the following ancillary services: the provision of breakfast; regular cleaning; the provision of linens and towels; and a customer reception (regardless of whether it is in person).
The revised administrative guidelines provide important clarifications on the duration of a stay and the provision of ancillary services, both of which are essential in determining whether parahotel services are subject to VAT:
- Whether accommodation services are taxable where the service provider offers customers a stay of up to 30 days, subject to the customer's decision: According to the tax authorities, whether or not the service is subject to VAT depends solely on the original offer made by the parahotel service provider, without prejudice to the customer's decision to extend their stay beyond 30 days.
- The provision of breakfast is characterised by the fact that it is offered in accordance with “professional practice”: Breakfast must be served in the rented accommodation or in a common area designated for that purpose. The mere provision of a vending machine does not meet this requirement.
- Cleaning the premises is characterised by the fact that it takes place before the stay commences and is offered to the customer on a regular basis during their stay: “Regularity” in this case is determined on the basis of the length of the customer's stay, with the tax authorities stating that weekly cleaning of the premises is satisfactory.
- The supply of linens is considered satisfactory if it is provided at the beginning of the stay and provided regularly by the accommodation provider: Regularity is also assessed on the basis of the length of the customer's stay and a supply of linens is considered sufficient if it takes place on a weekly basis. The simple provision of laundry facilities is not sufficient to fulfil this condition.
- Reception may be provided at a location other than the rented premises or through an electronic communication system: This flexibility allows service providers to choose between a physical reception limited to certain hours or a fully electronic experience.
David Hirsch
BDO in France