Holiday Homes: Registering Residence Does Not Save You from Tax if You Do Not Actually Live There All Year

The tax on holiday homes is a form of property tax, regulated by the Local Tax Act, and the revenue goes to the municipality or city in whose area the house or apartment is located, which the owner uses only temporarily. It is an optional tax form: local units can introduce it, but they are not obliged to. If the representative body of the city or municipality decides to impose taxes on houses and apartments that are used only occasionally, it must adhere to the prescribed limits of the minimum and maximum tax amounts.

The tax on holiday homes cannot be less than 0.60 euros or more than five euros per square meter of usable area of the house or apartment. This is an annual amount that is paid in one installment. The usable area does not include parts of the property that are not suitable for living, such as separate buildings for storing tools, housing animals, and similar.

What’s New

At the end of 2023, the Local Tax Act was amended, and Article 25 explicitly states that paying income tax based on the rental of apartments, rooms, and beds to travelers and tourists has no impact on determining the status of a holiday home. This has legalized the previously given opinion of the Central Office of the Tax Administration, according to which paying income tax based on income from renting a holiday home does not negate the obligation to pay tax on holiday homes. These are not substitute tax forms; paying one tax does not exclude the obligation to pay another type of tax.

In response to taxpayers’ questions, the Tax Administration has emphasized this fact several times this year, after the Local Tax Act was amended: paying income tax from tourist rentals does not exclude the obligation to pay tax on holiday homes. The opinions of the Central Office of the Tax Administration have been published on the Tax Administration’s website and are publicly available.

Establishing Facts

If the owner of a holiday home proves in proceedings before the Tax Administration that the house or apartment is used exclusively for tourist rentals throughout the year, they may be exempt from the obligation to pay tax on holiday homes. The tax authority can easily control whether the house or apartment is used throughout the year for conducting tourist activities, either through the eVisitor system or based on data obtained from intermediaries in the country and abroad, based on data on electricity and water consumption in the property in question, etc.

Registering the owner’s residence in a property that is only used temporarily does not exempt them from the obligation to pay tax on holiday homes, unless they actually reside in that property. This is because, according to tax regulations, residence is not determined based on formal registration under the Residence Act, but based on actual facts of residence in the house or apartment, as defined by the General Tax Act. In the event of a dispute between the tax administration and the property owner, the actual facts are relatively easy to establish and prove based on data on utility costs during different months of the year and other facts that document permanent residence in the property where residence is registered.

Possible Exceptions

Following these established rules, houses and apartments rented for permanent residence, on which income tax is paid based on rental income, either in a monthly amount determined by the Tax Administration or according to the rules of income taxation from self-employment, are not subject to the obligation of tax on holiday homes. This fact can also be easily proven by the taxpayer with a decision that establishes their obligation to pay income tax on property based on rental income for a specific year.

The law also regulates several exceptions to the obligation to pay tax on holiday homes. Tax is not paid on holiday homes that cannot be used due to war destruction and natural disasters (floods, fires, earthquakes) or due to age and dilapidation. Tax is also not paid on holiday homes while they are occupied by refugees and displaced persons, nor on resorts owned by local units that serve to accommodate children up to the age of fifteen.

Owners of houses and apartments that are only used temporarily were required to submit to the tax authority in whose area the property is located, by March 31 of the year for which the tax on holiday homes is determined, data about the holiday home. The data refers to the location of the property, usable area, and information about the taxpayer. A decision is made regarding the obligation and amount of the tax, and the tax must be paid within fifteen days from the date of delivery of the decision on the determination of the tax.