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 must file a tax return if your rental income exceeds CZK 50,000 per year (assuming you are not a VAT payer and do not keep accounts). Your employer will not do your annual tax reconciliation for you—that is a privilege reserved by the state for employees only. You are required to register yourself with the Financial Office by filing a tax return. 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)

As soon as you rent out a property (or part of it) for a period shorter than is typical for a long-term rental—usually for nights, a weekend, a week, or "for the duration of the purpose"—it is automatically considered an accommodation service. This applies regardless of whether you rent through Airbnb, Booking.com, directly via 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 rental, but a business in the field of accommodation services. 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 is automatically considered 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.

As soon as these features are met and you act systematically (not on a one-off basis), you are automatically considered a self-employed person (OSVČ), regardless of whether you have already obtained a trade license or not. The Financial Administration will assess it itself and classify your activity as a business.

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

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

For the self-employed in general, the trend is towards increasing transparency and strengthening control mechanisms. The Financial Administration and other authorities have better access to data, which makes it easier to detect discrepancies in tax returns and the fulfillment of other obligations. This means greater strictness during audits and potentially higher fines for non-compliance.

The obligation to obtain a trade license

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

How does the Financial Administration find out? Since 2023 (in connection with the implementation of the DAC7 directive), intermediaries (Airbnb, Booking.com) are obliged to report data on all accommodation providers to the Financial Administration—their income, number of nights, market, etc., according to Act No. 164/2013 Coll., on International Cooperation in Tax Administration. 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.

The minimum monthly advance payment for social and health insurance for a self-employed person in 2026 is in the range of seven to eight thousand crowns per month (the exact amount changes annually according to a government decree, based on the average wage). This means that even if you rent seasonally (only for three summer months), you must count on paying insurance contributions for those months. If you rent year-round, it amounts to about CZK 90,000 per year just for mandatory contributions, excluding VAT and income tax.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). The obligation to register as a VAT payer arises when your turnover exceeds CZK 2 million over 12 consecutive calendar months, according to Section 6 of the VAT Act.

What does this mean? As a VAT payer, you must keep accounts, report VAT in control statements and tax returns, and remit VAT to the state. In the Czech Republic, VAT on accommodation services is subject to the reduced rate of 12% (valid from 2024) according to Section 47 of the VAT Act. This means that when you rent an apartment for CZK 1,000 per night, the price includes CZK 120 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

Virtually all municipalities in the Czech Republic have a local ordinance that sets a local fee for stays—sometimes called an "accommodation fee" or "air tax" under Act No. 565/1990 Coll., on Local Fees. The fee is paid to the municipality where the property is located and is calculated for each person accommodated per night.

Typically, it is in the range of CZK 50–100 per person per night (but in tourist-heavy locations like Prague, it can be more). If you rent an apartment for 4 people and they stay there for 10 nights a month, that's CZK 2,000 per month that you must remit to the municipality.

The problem with property re-approval (rekolaudace)

A very important but often overlooked risk: if your property (apartment or house) is approved for use as a regular residential apartment, and you want to use it as an accommodation facility (short-term rentals), you must have a change of use permit—a so-called "rekolaudace" under the Building Act.

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 VAT or insurance contributions. A short-term rental, 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 classifies their activity itself—it is not their subjective decision. If you rent on a short-term basis, you will be considered a self-employed person (OSVČ) regardless of whether you have obtained a trade license or not. 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.