New administrative guidelines for VAT in the hospitality and hospitality like sectors
FranceSince 1 January 2024, are automatically subject to VAT:
- Hotel or similar accommodation provided for a period of no more than 30 nights; and
- furnished residential accommodation.
However, VAT only applies if at least 3 of the 4 following ancillary services are provided: breakfast, regular cleaning of the premises, supply of household linen and reception of clients, even if not personalised.
On 7 August 2024, the French tax authorities adjusted the administrative guidelines which now specify the conditions for the provision of the ancillary services (e.g., the provision of cleaning equipment to the customer is not sufficient to fulfil the cleaning condition). In addition, the guidelines state that VAT can be charged even if the ancillary services are not actually provided to the client, as long as these ancillary services are offered to the client and that this can be proven (e.g., displayed in the premises, welcome brochure).
Please note that, in principle, accommodation services are subject to VAT at the rate of 10%.
Key takeaway
These new clarifications should lead hospitality-like service providers to adapt their practices to comply with French rules. In particular, they should ensure, on a case-by-case basis, that ancillary services are provided in an effective and verifiable manner. In addition, an analysis of the services provided in addition to accommodation services (e.g., TV, parking) should be carried out to determine the applicable VAT rate in light of the composite supply principle (operations complexes).
