The business models in the sharing economy are often based on making it easy to rent out assets which are not in use most of the time. Some sharing models are based on the provision of services in return rather than money. This means that only services are involved, not money. What are the tax implications when services and services in return are offset against each other? What this means for your tax will depend on the form of sharing economy that is being used:
What distinguishes a hobby from a commercial activity?
The boundary between hobby and commercial activity is not clearly defined. See the Tax ABC for more information. If you are unsure, you can always contact us via email. To determine when an activity is a hobby or commercial activity, a specific assessment must be carried out to determine whether the activity:
- is carried on at the business’s own expense and risk
- has a certain scope
- is likely to generate a surplus over time
- is aimed at having a particular duration.
QUESTION: What if you are not sure whether or not an activity is legal? Can the activity be taxed when it is either obviously illegal or its legal status is uncertain?
ANSWER: Illegal income is also taxable. Activity that is illegal because no official licence or permit has been obtained for it does not constitute grounds for tax exemption; see the letter from the Ministry of Finance to the Directorate of Taxes of 8 September in Utv. 1999/200, which also states that “assuming that the general tax obligation conditions are otherwise met, it is necessary to establish a general rule concerning tax obligation regardless of whether a benefit is linked to illegal actions to a greater or lesser extent.”