Short-Term Rentals vs. Long-Term Leases 2026

How to tell where long-term rental ends and self-employment begins

The seemingly simple question, "What is a rental and what is an accommodation service?" proves in practice to be a key distinction that companies and property owners often overlook or underestimate. The difference is not merely formal—it involves a completely different legal regime with a major impact on your financial obligations and risk of penalties.

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

Under Czech legislation, a long-term rental is defined as granting the right to use a property for money, the main purpose of which is to satisfy the tenant's housing needs. The characteristic features of a long-term rental are:

You provide the property to a tenant for the purpose of satisfying their housing needs—i.e., for them to live in it as their home. The tenant may live there for months or years, sign a long-term contract with you, and the property is their actual home. No additional services are provided, or only minimal ones—typically just basic maintenance and repairs (replacing a socket, fixing the heating). The tenant manages their own heating and affairs in the apartment; it is not a hotel.

From a legal standpoint, this is not a business activity. If you are unsure how to correctly set up a rental agreement and the related responsibilities of the parties, legal support within our contracts and negotiations service can help. You are not required to have a trade license, you do not need to register as a self-employed person (OSVČ), and therefore you do not have to pay social security and health insurance contributions. This is a huge advantage—both administratively and financially.

From a tax perspective, the income is taxed under Section 9 of the Income Tax Act as "income from the rental of immovable property." A lump-sum expense deduction of 30% of the gross income can be applied, up to a maximum of CZK 600,000 per year. Alternatively, actual expenses can be claimed (repairs, insurance, mortgage interest, property tax). For some costs (especially when combining multiple income streams), it is advisable to verify the tax implications and the deductibility of expenses, similar to the analysis in our article unpaid B2B receivables: when can a loss from invoices be claimed as a tax-deductible expense. With the right setup, a lower tax liability can be achieved if actual expenses exceed income.

It is not a business, but it has one disadvantage: you handle the tax yourself in a tax return. You must file a return if your annual taxable income exceeds CZK 50,000. If you are an employee, you must file one as soon as your rental income (together with other side income) exceeds CZK 20,000 per year—the annual tax reconciliation by your employer is then not sufficient. The return is filed within 3 months after the end of the year, or within 4 months if filed electronically. In practice, registration and obligations are often linked to VAT issues and related tax assessments, which our tax law team can help with.

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

The Trade Licensing Act expressly states that the rental of real estate and apartments is not a trade. What is a trade, however, is the provision of accommodation (the field "Accommodation services"). The line therefore lies not only in the length of the stay, but mainly in what you provide to the guest besides the apartment itself. If you repeatedly rent out an apartment for nights, weekends, or weeks and arrange cleaning, a change of linen, key handover, or breakfast, the authorities will very likely assess your activity as an accommodation service—regardless of whether you rent through Airbnb, Booking.com, your own website, or in person.

In practice, therefore: the shorter the stays and the more services, the more likely it is a business in the field of accommodation services, and not a rental. The reason is simple—the person seeking accommodation is not looking to satisfy their housing needs (to establish a home there), but is looking for temporary shelter for a few nights, along with associated services (cleaning, change of linen, reception, information).

The characteristic features by which the Financial Administration classifies an activity as an accommodation service are:

Rental period: The rental is provided on a short-term basis—for nights, weekends, weeks, or seasonally. Even if the period is extended (e.g., a seven-day rental that is rented out again and again every 7 days), it is also considered a repeated short-term activity, which is classified as an accommodation service.

Purpose of the rental: The tenant rents the property for the purpose of tourism, recreation, a business trip, or a one-off stay—not to establish a home. If the tenant's behaviour indicates "I'm here for the weekend, then I'm leaving," it is an accommodation service.

Services provided: Accommodation is typically associated with services such as cleaning, changing bed linen, providing breakfast, reception, and information for guests. If you rent out a property and also take care of cleaning, make the beds, or offer breakfast, it will generally be assessed as an accommodation service, not a rental. When setting up cooperation with external managers, cleaning companies, or reception services, it is worthwhile to address the contractual regime and the risks of "švarcsystém" (disguised employment), which are also summarized in our article external contractors versus employees: how to correctly set up contractual relationships and eliminate the tax risks of disguised employment.

Method of promotion: How is the rental offered on the internet or elsewhere? If it is offered as a "weekend apartment," "apartment rental for travellers," "accommodation on the road," or an "Airbnb offer," then it signals that it is an accommodation service.

If these features are met and you act systematically (not on a one-off basis), both the Financial Administration and the Trade Licensing Office will assess the activity according to its actual substance—the fact that you do not have a trade license changes nothing.

Hidden tax and legal risks of long-term rentals

Providing services such as regular cleaning, bed linen, or breakfast transforms a passive rental into an accommodation service. If the Financial Administration reclassifies your rental as a business (Section 7), even retroactively, you risk an assessment for social security and health insurance contributions. The key to safety is a precisely drafted rental agreement and limiting supplementary services to the bare minimum.

A common mistake is claiming mortgage interest under Section 15, which is intended only for one's own housing; for a rental property, it is an expense under Section 9. Also, beware of confusing regular repairs with technical improvements, which must be depreciated over time. The tax office strictly punishes these errors during audits with tax assessments and penalties in the range of tens to hundreds of thousands of crowns.

When using platforms like Airbnb or Booking.com, a landlord who is not a VAT payer becomes an identified person under Section 6h of the VAT Act, regardless of the turnover amount (for VAT purposes, renting is an economic activity, so this also applies to long-term landlords). The reason is the receipt of a service (commission) from a foreign company, on which the landlord must declare and pay the VAT themselves (so-called reverse charge). An identified person declares VAT in a VAT return; only a VAT payer submits a control statement. Neglecting this leads to a tax assessment, penalties, and fines for late filing.

The Prague-based lawyers at ARROWS law firm will help you correctly set up your contracts and tax strategy so that your business or rental fully complies with the current legislation for 2026. For a consultation on the risks, contact us at consultation@arws.cz.

Hidden tax and legal risks of short-term rentals (self-employment regime)

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

What has changed for the self-employed (OSVČ) in 2026

Since May 20, 2026, Regulation (EU) 2024/1028 on data collection and sharing relating to short-term accommodation rental services has applied throughout the EU. The Regulation itself does not require hosts to register: it lays down uniform rules for states that introduce registration. In such a state, a host must have a registration number, platforms display it with the listing and verify it on a random basis, and they regularly pass data on hosts' activity to the authorities.

The Czech Republic has not yet introduced host registration or the eTurista system. A deputies' bill amending the Act on Conditions for Doing Business in Tourism (Chamber of Deputies Print No. 106), which is intended to introduce a register of accommodation facilities (eTurista) and registration numbers under the Regulation and to raise the cap on the stay fee to CZK 100, has not yet passed its first reading, and the government has issued a negative opinion on it. If it is adopted, the rules will change again.

Regardless of this, the Financial Administration already receives data on accommodation providers' income from platforms under the DAC7 rules (see below).

The obligation to obtain a trade license

As soon as you provide an accommodation service, you must obtain a trade license for accommodation services—this is an unregulated trade (the field "Accommodation services" under Government Regulation No. 278/2008 Coll.), which can be obtained without prior education or authorization, but you are required to have it. If you do not have a trade license and the Trade Licensing Office discovers you, you as an individual face a fine of up to CZK 500,000 for operating an unregulated trade without authorization under Section 61 of the Trade Licensing Act.

How does the Financial Administration find out? Since the 2023 reporting period (implementation of the DAC7 directive), platform operators (Airbnb, Booking.com) have reported data on accommodation providers to the tax administrator under Act No. 164/2013 Coll., on International Cooperation in Tax Administration: the address of each property offered, the total payments for each quarter, the number of rentals and—if available to them—the number of days rented. They file the report by January 31 of the following year. If you have not obtained a trade license, the Financial Administration sees this and can target you. There is therefore a high probability that you will be discovered.

Insurance contributions – thousands of crowns per month

Once you become a self-employed person (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 Act on Public Health Insurance. This is not a small amount.

If the business is your main activity, you pay minimum advance payments even if your profit does not exceed the minimum assessment base. This base is derived from the average wage: for social security, it is 35% of the average wage from July 1, 2026 (Act No. 90/2026 Coll.; the ČSSZ will refund the overpayment for January to June 2026 upon a request filed by December 31, 2026), and for health insurance, 50% of the average wage. In 2026, this adds up to roughly CZK 8,300 per month, i.e., around CZK 100,000 per year just for mandatory contributions, excluding VAT and income tax. Self-employed persons who are just starting out benefit from reliefs (a lower minimum base in the first years, or no advance payments for social security in the first year). If you are also an employee or the business is a secondary activity, minimum advance payments are not paid or are significantly lower—social security contributions are then paid only once the statutory decisive amount is exceeded. Setting up the main and secondary activity correctly therefore makes a big difference in the rental budget.VAT – registration obligation and complications

If you rent through Airbnb or Booking.com, a VAT registration obligation may arise under the VAT Act. As already mentioned, registration as an identified person occurs as soon as you receive services from abroad (e.g., commission from Airbnb/Booking.com). You become a VAT payer from January 1 of the year following the year in which your turnover exceeded CZK 2,000,000; if you exceed CZK 2,536,500 during the year, you become a payer as early as the following day (Section 6 of the VAT Act).

What does this mean? As a VAT payer, you must keep records for VAT purposes, file tax returns and control statements, and remit VAT to the state. Accommodation services are subject to the reduced rate of 12% (Section 47 and Annex No. 2 of the VAT Act). When you rent an apartment for CZK 1,000 per night including VAT, the price includes roughly CZK 107 in VAT. 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 face an additional tax assessment for all the years you should have been dealing with VAT, plus fines and penalties. This can amount to tens or even hundreds of thousands of crowns.

Local accommodation fee – different in every municipality

The stay fee under Act No. 565/1990 Coll., on Local Fees, is collected by municipalities that have introduced it by a generally binding ordinance—so check your municipality's ordinance before you start renting. The fee is paid by the guest (a person not registered as a resident in the municipality) for each commenced day of the stay except the day of arrival, i.e., in practice per night. As the accommodation provider, you must collect it from the guest, remit it to the municipality, and keep a guest register, which you retain for 6 years.

The rate is set by the municipality in its ordinance, but the law caps it: it is at most CZK 50 per person per day, including in Prague. If you rent an apartment for 4 adults and they stay there for 10 nights a month, it can be up to CZK 2,000 per month that you collect and remit to the municipality (persons under 18 are exempt from the fee). The proposal to raise the cap to CZK 100 (Chamber of Deputies Print No. 106) has not yet passed its first reading.

The problem with property re-approval (rekolaudace)

A very important but often overlooked risk: if the property is approved for use as a residential apartment and you in fact operate it as an accommodation facility, the building authority may conclude that you are using it contrary to the occupancy approval. A permit for a change of use of the building is then required—a so-called "rekolaudace" (Section 239 of the Building Act). Whether short-term accommodation in a particular apartment requires a change of use is assessed on a case-by-case basis.

Re-approval is not a simple administrative decision. It is a building-law process where the building authority assesses whether the property meets the conditions for the new purpose (accommodation facility), including fire regulations, escape routes, noise levels, etc. In many cases, re-approval is difficult or impossible to obtain because buildings in ordinary apartment blocks often do not meet the requirements for accommodation facilities. 

Final summary

The difference between a long-term rental and a short-term rental is not a mere formality. It is the line between passive income with few obligations and a full-fledged business with corresponding commitments and risks.

A long-term rental can be managed relatively easily—you just need to file a tax return with a 30% lump-sum expense deduction and you don't have to worry about insurance contributions or VAT payer status. A short-term rental with accommodation services, on the other hand, means a trade license, insurance contributions, VAT (including the obligation of an identified person), local fees, and the potential need for building re-approval.

The most common mistake owners make is not realizing that the Financial Administration assesses their activity according to its actual substance—it is not their subjective decision. If you accommodate guests on a short-term basis and provide them with services, you will generally be treated as a self-employed person (OSVČ) for tax and contribution purposes regardless of whether you have a trade license. This can then lead to audits, additional tax assessments, and fines.

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 law firm. Together with you, we will review all the factual circumstances, define the correct tax regime, and ensure that your rental complies with the law. Contact us: consultation@arws.cz.