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Long-Term vs Short-Term Rentals

Tax, Own-account Worker Status and Legal Risks

Mgr. Daniel Půlpán
Mgr. Daniel Půlpán
Trainee attorney|Czech Bar Association Reg. No. 47462
ARROWS law firm
Published:Updated:

If you own a property and are considering how best to monetise it, the difference between long-term and short-term rentals (Airbnb, Booking) is substantial. It is the line between passive income and the full obligations of a business operator. The tax regime, VAT, social security and health insurance contributions, local fees, and even re-approval for use (re-occupancy permit) differ radically. In this article, we clarify when you become a self-employed person (OSVČ), what fines you may face, and how to avoid pitfalls that increase costs.

The photo shows a specialist discussing the difference between long-term and short-term rentals.

Summary in bullet points:

  • Long-term rental is simpler: It is taxed under Section 9 of the Income Taxes Act (also referred to as the “ITA”); you are not an entrepreneur, there is no obligation to pay social security and health insurance contributions, and you can apply flat-rate expenses of 30% of income up to a limit of CZK 600,000 per year.
  • Short-term rental is a business activity: As soon as you rent out a property on a short-term basis (Airbnb, Booking, or even without a platform), it is considered an accommodation service under Section 7 of the ITA – you must obtain a trade licence, account for VAT (including the obligation to register as an identified person), pay social security and health insurance contributions, and comply with a number of other obligations.
  • The tax regime cannot be “circumvented”: The Czech Financial Administration automatically classifies short-term rental as a business activity regardless of whether you have obtained a trade licence or not – and it penalises missing registration with a higher tax rate and fines.
  • Combining both regimes is risky: If you rent one property long-term and another short-term, each part is assessed separately – and misclassification can lead to an audit and additional tax assessments with penalties.

How to identify where long-term rental ends and self-employment (OSVČ) begins

The seemingly simple question “What is a lease and what is accommodation?” proves in practice to be a key dividing line that companies and property owners often overlook or underestimate. The difference is not merely formal – it is an entirely different legal regime, with a fundamental impact on your financial obligations and the risk of sanctions.

Long-term rental under Section 9 of the Income Taxes Act

Long-term rental is defined by law as granting the right to use real estate in exchange for money, the main purpose of which is to satisfy the tenant’s housing need. The characteristic features of long-term rental are:

You provide the property to the tenant in order to satisfy their housing need – i.e., so that they live in it as a home. The tenant may live there for months or years, sign a long-term agreement with you, and the property is their real home. No additional services are provided, or only minimal ones – typically only basic maintenance and servicing (replacing a socket, repairing heating). The tenant heats the property themselves, manages items in the apartment themselves; it is not a hotel.

From a legal perspective, this is not a business activity. If you are not sure how to set up the lease agreement correctly and allocate the related liabilities between the parties, legal support under our contracts and negotiations service can help. You are not required to hold a trade licence, you do not have to register as self-employed (OSVČ), and therefore you do not have to pay social security and health insurance contributions. This is a major advantage – both administratively and financially.

For tax purposes, the income is taxed under Section 9 of the Income Taxes Act as “income from the lease of immovable property”. You can apply flat-rate expenses of 30% of gross income, up to a maximum of CZK 600,000 per year. Alternatively, you can claim actual expenses (repairs, insurance, mortgage interest, real estate tax). For certain costs (especially when combining multiple types of income), it is advisable to verify the tax implications and deductibility of expenses, similar to what is discussed in our update unpaid receivables in B2B: when a loss from invoices can be claimed as a tax-deductible expense. With the right setup, you can achieve a lower tax liability if actual expenses exceed income.

This is not a business activity, but it has one drawback: you must file a tax return if rental income exceeds CZK 50,000 per year (provided that you are not a VAT payer and you do not keep accounts). Your employer will not prepare an annual tax reconciliation for you – that is reserved by the state only for employees. You are required to register with the Czech Tax Office yourself by filing a tax return. In practice, registrations and obligations are often linked to VAT issues and related additional assessments, with which our tax law team can assist.

Short-term rental – when you become self-employed (OSVČ)

As soon as you rent out a property (or part of it) for a period shorter than what is customary for long-term rental – typically for nights, a weekend, a week, or “for a period depending on the purpose” – it is automatically considered an accommodation service. This applies regardless of whether you rent via Airbnb, Booking, directly through a website, or even in person.

Legislation and court case law are consistent and uncompromising in this respect: providing short-term accommodation is not a lease; it is a business activity in the accommodation services sector. The reason is simple – the accommodation guest is not seeking to satisfy a housing need (to establish a home there), but is looking for temporary shelter for a few nights, together with related services (cleaning, linen changes, reception, information).

The characteristic features under which the Czech Financial Administration classifies the activity as accommodation are:

Rental period: The rental is provided short-term – for nights, a weekend, weeks, seasonally. Even where the period is extended (e.g., a seven-day rental where it is re-rented every 7 days again and again), it is still a repeated short-term activity classified as accommodation.

Purpose of the rental: The guest rents the property for tourism, recreation, a business trip, or a one-off stay – not to establish a home. If the guest’s behaviour indicates “I’m here for the weekend and then I’m leaving”, it is accommodation.

Services provided: Accommodation typically involves services such as cleaning, changing bed linen, providing breakfast, reception, and guest information. If you rent out a property and also take care of cleaning, make the beds, or offer breakfast, it is automatically considered accommodation, not a lease. When setting up cooperation with external property managers, cleaning companies, or reception services, it is worth addressing the contractual framework and the risks of “švarcsystém” (bogus self-employment), which are also summarised in our update external suppliers versus employees: how to set up contractual relationships correctly and eliminate tax risks of disguised employment.

Method of promotion: How is the rental offered online or elsewhere? If it is offered as a “weekend apartment”, “apartment rental for travellers”, “accommodation while travelling”, or an “Airbnb listing”, this signals that it is accommodation.

Once these criteria are met and you act on a continuous basis (not as a one-off), you are automatically considered self-employed (OSVČ) regardless of whether you have already obtained a trade licence or not. The Financial Administration will assess this on its own and classify your activity as business.

Related questions on distinguishing between lease and accommodation

1. I am a pensioner and I rent one apartment long-term to a friend. Do I need to obtain a trade licence?

No. In the case of a genuine long-term lease (housing), you are not an entrepreneur and you do not need a trade licence. You tax the income under Section 9. You file the tax return under Section 38g by 31 March (paper filing) or by 4 May 2026 (electronically) if your total taxable income for the year exceeded CZK 50,000.

2. I rent an apartment via Airbnb, but only during the summer for 2–3 months. The rest of the year the apartment is empty. Is this business activity?

Yes. Even if you rent only seasonally, the Financial Administration considers it a continuous activity if it repeats every year. This is the exact definition of business under the Trade Licensing Act—continuous, repeated and intentional performance of an activity for profit. You must obtain a trade licence and fulfil all obligations of a self-employed person (OSVČ).

3. I rent an apartment long-term, but during the tenant’s absence I rent it via Airbnb for a week. How is this taxed?

Each part is assessed separately. Long-term rental income is taxed under Section 9 of the Income Taxes Act, short-term rental under Section 7 of the Income Taxes Act. In the tax return, you then have two parts of income with different tax treatment. However, this will attract the attention of inspectors—you must be able to clearly prove which part is which. The attorneys at ARROWS, a Prague-based law firm, can help you document this correctly (consultation@arws.cz).
ARROWS law firm
245 007 740consultation@arws.cz

Hidden tax and legal risks of long-term rental

Providing services such as regular cleaning, bed linen or breakfast turns a passive lease into an accommodation service. If the Financial Administration reclassifies your rental as business activity (Section 7), even retroactively, you may face additional assessments of social security and health insurance contributions. The key to safety is a precisely drafted lease agreement and limiting ancillary services to the absolute minimum.

A common mistake is claiming mortgage interest under Section 15, which is intended only for owner-occupied housing; for rental, it is an expense under Section 9. Also beware of confusing routine repairs with technical improvements, which must be depreciated over time. The tax office penalises these errors strictly during audits by assessing additional tax and penalties in the tens to hundreds of thousands of Czech crowns.

When using platforms such as Airbnb or Booking, an obligation arises to register for VAT as an identified person under Section 6h of the VAT Act, regardless of turnover. The reason is the payment of commission to a foreign company (reverse charge). Neglecting this administration leads to unpaid VAT on received services and fines for failing to submit VAT control statements, which are mandatory under this regime.

The attorneys at ARROWS, a Prague-based law firm, can help you set up your contracts and tax strategy correctly so that your business or rental fully complies with the legislation in force in 2026. To discuss the risks, contact us at consultation@arws.cz.

Hidden tax and legal risks of short-term rental (OSVČ regime)

Short-term rental seems simple—rent out and collect. The reality is more complex and more costly than most owners think.

What has changed for OSVČ in 2026

For self-employed persons (OSVČ), there is a general trend towards greater transparency and stronger control mechanisms. The Financial Administration and other authorities have better access to data, making it easier to detect inconsistencies in tax returns and the fulfilment of other obligations. This means stricter audits and potentially higher fines for non-compliance.

Obligation to obtain a trade licence

As soon as you rent short-term, you must obtain a trade licence in the field of accommodation services—this is an unregulated trade under Annex No. 4 to the Trade Licensing Act, which can be obtained without prior education or authorisation, but you must have it. If you do not obtain it and the Financial Administration or the Trade Licensing Office discovers you, you may be fined up to CZK 1 million for unauthorised business under Section 61 of the Trade Licensing Act.

How will the Financial Administration find out? Intermediaries (Airbnb, Booking) have been required since 2023 (in connection with the implementation of the DAC7 Directive) to report to the Financial Administration data on all accommodation providers—their income, number of nights, marketplace, etc.—under Act No. 164/2013 Coll., on International Cooperation in Tax Administration. If you have not obtained a trade licence, the Financial Administration will see it and may target you. There is therefore a high likelihood that you will be detected.

Insurance contributions – thousands of Czech crowns per month

Once you become self-employed (OSVČ), you are obliged to pay social security contributions to the Czech Social Security Administration (ČSSZ) under the Act on Social Security Contributions, and health insurance contributions to your health insurance company under the Public Health Insurance Act. This is not a small amount.

The minimum monthly advance payment for social security and health insurance for OSVČ in 2026 is in the range of seven to eight thousand Czech crowns per month (the exact amount changes annually by government decree and is based on the average wage). This means that even if you rent seasonally (only three summer months), you must expect to pay contributions for those months. If you rent year-round, it is approx. CZK 90,000 per year in mandatory contributions alone, excluding VAT and income tax.

VAT – registration obligation and complications

If you rent via Airbnb or Booking, a VAT registration obligation may arise under the VAT Act. As mentioned above, registration as an identified person occurs as soon as you receive services from abroad (e.g., commissions from Airbnb/Booking.com). The obligation to register as a VAT payer arises when your turnover exceeds CZK 2 million over 12 consecutive calendar months under Section 6 of the VAT Act.

What does this mean? As a VAT payer, you must keep accounts, report VAT in VAT control statements and VAT returns, and pay VAT to the state. VAT on accommodation services in the Czech Republic is considered a reduced rate of 12% (effective since 2024) under Section 47 of the VAT Act. This means that if you rent an apartment for CZK 1,000 per night, the price includes VAT of CZK 120. You must remit this amount to the state—it is not your income.

If you “forget” to deal with VAT and the Financial Administration finds out, you risk additional tax assessments for all years in which you should have dealt with VAT, plus fines and penalties. This can amount to tens of thousands to hundreds of thousands of Czech crowns.

Local accommodation fee – each municipality is different

Practically all municipalities in the Czech Republic have a municipal ordinance that sets a local stay fee—sometimes called an “accommodation fee” or “air fee”—under Act No. 565/1990 Coll., on Local Fees. The fee is paid to the municipality in whose territory the property is located and is calculated for each accommodated person for each night.

Typically, it is around CZK 50–100 per person per night (but in heavily visited tourist locations, such as Prague, it can be more). If you rent an apartment for 4 people and they stay 10 nights per month, that is CZK 2,000 per month that you must pay to the municipality.

Issue with re-approval of the property’s permitted use

A very important but often overlooked risk: if your property (an apartment or a house) has been approved for use as a standard residential unit, and you want to use it as accommodation (short-term rentals), you must obtain a change of use – i.e., a re-approval under the Czech Building Act.

Re-approval is not a simple administrative decision. It is a construction-law process in which the Building Authority assesses whether the property meets the requirements for the new purpose (accommodation), including fire safety regulations, escape routes, noise limits, etc. In many cases, re-approval is granted only with difficulty or not at all, because buildings in standard residential blocks often do not meet the requirements for accommodation facilities. 

Related questions on legal and construction-law risks of accommodation

1. I rent out an apartment without re-approval. Is it really that serious?

Yes. Re-approval confirms that the premises meet stricter standards (e.g., fire safety) for accommodation. Without it, the Building Authority may prohibit the activity and impose a high fine. In addition, the Fire Brigade may impose a penalty of up to CZK 250,000 for providing accommodation services in non-compliant premises. ARROWS specialists can help you legalise the intended use.

2. We have a house with multiple apartments. We rent one long-term and one short-term. How is it taxed?

Each apartment is handled under a different regime: long-term lease under Section 9, short-term accommodation under Section 7 (as a self-employed individual). The risk is that the tax authority will start viewing the entire building as an accommodation facility and will require social security and health insurance contributions even on the long-term contracts. It is therefore essential to keep absolutely precise and separate records for each unit.

3. What if I rent out my apartment and occasionally rent it out myself when I’m not at home?

If it is a completely occasional rental (e.g., 2 weeks a year), it is usually possible to remain in the lease regime (Section 9). However, once the activity is organised and repeats every month, the tax administration can easily classify it as business activity based on platform data (DAC7). The line will be very sharp in 2026, so we recommend an individual consultation at ARROWS.
ARROWS law firm
245 007 740consultation@arws.cz

Potential issues

How ARROWS helps (consultation@arws.cz)

Incorrect classification: lease vs. accommodation – During an audit, the tax administration finds that your activity should have been classified differently and assesses additional tax and penalties of up to 50% of the underpaid tax.

ARROWS lawyers will review the specific factual circumstances of your rental and help you document the correct classification in your tax return. If you are already under audit, we represent you in dealings with the Czech tax authority.

Incorrect application of expenses – An audit finds that you claimed expenses that are not legally deductible (e.g., personal consumption expenses).

We will provide a legal opinion on which expenses are tax-deductible in your specific situation and, if necessary, help you file a correction to your tax return to avoid penalties.

Missing trade licence or incorrect tax regime for a self-employed individual – During an inspection, they find that you rent short-term without a trade licence, or that you failed to meet VAT registration obligations.

ARROWS will help you apply for a trade licence, with retroactive VAT notification/registration (if required), and with representation in resolving a dispute with public authorities. If a fine is threatened, we will protect your interests.

Absence of re-approval of the building – The Building Authority or the Fire Brigade finds that you rent out the property without a change of use and orders you to stop renting or imposes a fine of up to CZK 500,000.

We will start preparing the documentation for a change of use (re-approval) or negotiating with the authorities. If necessary, we will also assist you with legal defence if the situation has already escalated.

VAT – missing registration or reporting errors – An audit by the tax administration finds that you should be a VAT payer but are not registered, or that you reported VAT incorrectly.

ARROWS will arrange your VAT registration (including retroactively) and help with corrected reporting. We will also handle negotiations with the tax administration if penalties are at risk.
ARROWS law firm
245 007 740consultation@arws.cz

 

Final summary

The difference between a long-term lease and a short-term rental is not merely a formality. It is the boundary between passive income with limited obligations and full-fledged business activity with corresponding duties and risks.

A long-term lease can be handled relatively easily – it is enough to file a tax return with a 30% flat-rate expense deduction and you do not have to deal with VAT or insurance contributions. Short-term rental, on the other hand, means a trade licence, insurance contributions, VAT (including the obligation to register as an identified person), local fees, and the potential need for re-approval of the building.

The most common mistake owners make is not realising that the tax administration classifies their activity on its own – it is not their subjective decision. If you rent short-term, you will be self-employed regardless of whether you have obtained a trade licence or not. This can then lead to audits, additional tax assessments, and penalties.

If you want to avoid these risks and be sure that your rental is set up correctly from a tax and legal perspective, do not hesitate to contact the lawyers at ARROWS advokátní kancelář. Together with you, we will review all factual circumstances, define the correct tax regime, and ensure that your rental is compliant with Czech law. Contact us: consultation@arws.cz.

FAQ: Most common questions on short-term rentals and standard leases

1. How many nights do I have to rent out for it to count as a short-term rental and for me to become self-employed?

There is no fixed number of nights. What matters is continuity and the intention to make a profit. Even a seasonal rental for a few weeks in summer, if repeated every year, is considered business activity (Section 7). Thanks to automatic reporting by platforms (DAC7), the tax administration can easily trace these incomes.

2. I am an individual with long-term rental income and I also have income from another activity (e.g., as an employee). How is this combined for tax purposes?

You add up all income in a single tax return. If your total tax base for 2025 exceeds 36 times the average wage (approx. CZK 1.67 million), the amount above this limit is subject to a 23% tax rate instead of the basic 15% (Section 16). If you are concerned you might exceed this limit, contact ARROWS (consultation@arws.cz).

3. Can I deduct mortgage interest for an apartment that I rent out?

Yes, but for rental income it is not a deductible item under Section 15 (which applies only to owner-occupied housing); instead, it is a tax expense reducing the tax base within Section 9. The mortgage must be demonstrably used to finance the purchase or reconstruction of the given apartment. Incorrectly claiming it under Section 15 for a rental apartment is a common mistake that the authorities penalise.

4. If I rent out an apartment without VAT (because I did not reach the CZK 2 million turnover threshold), can I at least deduct input VAT that I paid (e.g., for repairs)?

No. Long-term lease is exempt from VAT under Section 56a of the VAT Act without the right to deduct. You therefore cannot claim back VAT paid in the price of repairs or furniture. The right to deduct arises only for taxable accommodation services (Section 7), if you are a VAT payer or an identified person.

5. I live in a house and rent out only one room in it, where I also live myself. How is this taxed?

What matters is the nature of the stay, not the size of the rented area. A long-term sublease to a flatmate for housing purposes falls under lease income (§ 9). However, if you offer the room to tourists via Airbnb, it is an accommodation service (§ 7) with all self-employed (OSVČ) obligations. Also watch out for building regulations regarding the need to re-approve (reclassify) part of the house for a different use. Before you start, we recommend consulting the attorneys at ARROWS (consultation@arws.cz).

6. What is the safest way to document that this is a long-term lease so that I avoid an audit?

The basis is a precise lease agreement under the Czech Civil Code, which explicitly states that the purpose of the lease is to meet the tenant’s housing needs (not recreation). The agreement should be concluded for a longer period (min. 1 year) and must not contain hotel-type elements such as cleaning or breakfast. ARROWS can prepare a high-quality template for you (consultation@arws.cz).

DO YOU HAVE MORE QUESTIONS? GET IN TOUCH

ARROWS law firm
245 007 740consultation@arws.cz

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About the author

Mgr. Daniel Půlpán
Mgr. Daniel Půlpán

Junior associate

Czech Bar Association Reg. No. 47462
Mgr. Daniel Půlpán works at the Hradec Králové branch of the ARROWS law firm, where he focuses on corporate law and contractual matters. As part of a comprehensive service, he closely integrates this practice with representing clients in civil litigation, including enforcement and insolvency proceedings.
pulpan@arws.cz245 007 741

Disclaimer:

The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.