Draft Finance Bill for 2024 provides for amendments to the conditions for applying VAT in the hospitality and hospitality-like sectors

The 2024 Finance Bill brings clarification to the VAT regime applicable to the hospitality and residential housing sectors by aligning the French domestic law with article 135(2)(a) of the VAT directive.

According to article 261 D of the French Tax Code as currently in force, the following transactions are subject to VAT:

• accommodations provided in hotels, and
• accommodations provided in (i) sectors with a function similar to the hotel sector and (ii) the residential sector where three out of the four services that are breakfast, regular cleaning of the premises, supply of linen and reception of customers, are provided.

The draft Finance Bill, further to an opinion issued by the French administrative Supreme Court,¹ is aimed at providing a distinction between (i) hotels and similar activities on the one hand, and (ii) activities in the residential housing sector (student residence, retirement homes, etc) on the other hand.

For the first category, if the Finance Bill is voted, the supply of accommodation would be subject to VAT where the following conditions are cumulatively met:

• stay limited to thirty nights (without prejudice to the possibility of renewal), and
• at least three out of the four services mentioned above are supplied.

For the second category, the supply of furnished premises for residential use in sectors other than hotels would be subject to VAT, provided that at least three of the above-mentioned services are supplied.

 

Key takeaway

In practice, this amendment would have the effect of keeping the same rules as those currently applicable, but by presenting it in a way that appears more compatible with the EU directive.

These changes are included in the draft Finance Bill proposed by the French Government within the context of the application of article 49,3 of the Constitution, which allows the bill to pass the French National Assembly without a vote, increasing the chances of its final adoption.

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¹Conseil d’Etat, July 5th, 2023, n° 471877