We are once again in the midst of tax return season, a time when accountants and taxpayers must carefully review data from previous years and correct any omissions or errors.
In this context, the AADE (Independent Authority for Public Revenue) has started sending notices to property owners involved in short-term rentals, following data cross-checks for tax years from 2020 onwards.
Why AADE is checking records from 2020
There is a five-year limitation period for tax liabilities. As this period is drawing to a close for 2020, thorough checks are being conducted for any unassessed debts.
Short-term rental platforms have submitted their transaction data, and AADE is cross-referencing this information with the Short-Term Accommodation Property Register and the corresponding tax returns.
Mistakes in short-term rental declarations and fines
Unfortunately, several mistakes have been recorded in how income from short-term rentals is declared. In some cases, owners were unaware of the exact amounts that needed to be declared, while in others, discrepancies seem to stem from the specific nature of the bookings and the platforms themselves.
These situations may involve cancelled bookings, lumped payments covering different periods, changes in property managers, or other alterations that affect income declarations.
Examples of recorded discrepancies
The discrepancies identified by AADE are not always due to tax evasion. Many of them relate to how the platforms operate or errors made when declaring revenue.
The following are some of the most common examples:
- Booking cancellations and off-platform refunds. In certain cancellations, part of the money was refunded directly to the guest following a mutual agreement. Although the owner did not keep the full amount, the platform may have recorded both the initial and the new booking as completed revenue, creating discrepancies in the data received by AADE.
- Declaring net instead of gross amounts. This is one of the most common mistakes. Many owners declared the final amount that landed in their bank account after platform commissions and fees were deducted. However, for tax purposes, the total amount paid by the guest before any deductions should be declared.
- Lump-sum payments across different years. Some owners choose to receive payouts only when a minimum threshold is met. Consequently, bookings made in different tax years might appear as a single payment at a later date, complicating the cross-referencing of declared data.
- The peculiarities of the pandemic period. The mass cancellations and rebooked stays that occurred in 2020 created discrepancies between the time a booking was made and when the relevant funds were paid out, which can affect data matching.
- Change of property manager or AMA (Property Registry Number). Issues also seem to arise when changing the property manager, issuing a new AMA, or altering ownership status. In these cases, careful data verification is required to ensure income has been attributed to the correct person and the correct tax period.
- Declaring higher amounts. There are reports of owners receiving notices for discrepancies even though they declared higher amounts than those shown on the platforms’ records. Such cases may be linked to booking cancellations, refunds, or other accounting specifics that require further investigation.
What happens when a discrepancy is found
Receiving a notice from AADE does not necessarily mean a tax violation has occurred. Often, it simply requires providing additional documentation or submitting an amended tax return to correct the data.
If it turns out that the declared amounts are lower than the actual revenue, the taxpayer may be asked to submit an amended return, pay the corresponding tax, and bear the standard fine. Currently, this fine stands at €100 for late amended returns filed by individuals without accounting books.
Depending on the situation, additional taxes or surcharges may also apply, leading many owners to seek accounting support to verify and correct their records.
For this reason, property owners involved in short-term rentals are advised to promptly check both their previous years’ tax returns and the data displayed on the platforms. This allows them to spot any discrepancies before the audits are finalised.
At Sparrow, we ensure that all your property’s booking and revenue data is always available and well-organised. This way, you know exactly what has been collected and what needs to be declared at any given time, allowing you to safely manage any audit or data cross-check request from AADE.
