British landlords with overseas property rentals set to pay VAT in EU nations

British landlords with holiday rentals located in countries within the European Union (EU) may soon be required to pay VAT on their rental income. The rules will impact landlords who let property in the EU using digital platforms 

The introduction of the EU’s ‘VAT in the Digital Age’ scheme is set to have a substantial effect on travel and hospitality across Europe. It will particularly affect platforms such as Booking.com and Airbnb, who make it easy for landlords to be paired with travellers via their online and mobile portals. 

From 2025, any landlords who let our holiday accommodation located within an EU member state will need to pay an average of 20% VAT regardless of whether the landlord is residing in the same country or outside the EU. 

The 20% VAT charge will be applied to the platform operators, requiring landlords to factor this cost into their rental fees to maintain their current profit margins. 

The EU predicts that almost three-quarters (70%) of accommodation providers using on-demand platforms like Airbnb and Booking.com aren’t VAT-registered. This alone will cause administrative headaches for operators, who will need to notify which providers are VAT-registered and those who don’t yet have VAT numbers to each applicable member state. 

This also includes firms that act as local agents for landlords owning holiday villas, apartments and cottages across Europe. 

The VAT in the Digital Age programme is designed to bring a sense of equality to the EU’s tax rules in the travel and hospitality sector. Today, hotels and conventional taxi services pay VAT on all the sales they disclose, unlike independent landlords and taxi services due to the complexities surrounding VAT registration. 

Will this new programme impact property rentals in the UK? 

Given that the UK left the EU in January 2020, this programme will not directly impact landlords of holiday accommodation across Britain. 

Although it will affect those British landlords with holiday accommodation located within EU member states, regardless of whether they live in the UK. 

It is possible the Chancellor may monitor the success of the EU’s VAT in the Digital Age programme and consider taking a similar path to improve tax parity in the years ahead. 

This change is one of several recent and proposed rule changes which could impact owners of holiday accommodation, to find out more please see our article outlining the changes. 

Date published 4 Jul 2023 | Last updated 20 Mar 2024