Guest Apartment: What It Is and What You Should Know
Have you thought about investing in a serviced apartment or have you simply heard the term and want to know what it exactly means? In the Estonian real estate market, serviced apartments are becoming an increasingly popular form of investment, but they come with several peculiarities that are worth knowing before purchase.
What is a serviced apartment?
A serviced apartment (or in English, serviced apartment) is officially an accommodation business that is rented out as a whole, typically for short-term use. Section 18, subsection 8 of the Tourism Act defines it as a separate type of accommodation with its own requirements and regulations.
A serviced apartment differs from a regular rental apartment in several ways:
It is intended primarily for short-term rental (for tourists, business travelers)
It is typically fully furnished with all amenities
Services are often offered with serviced apartments (cleaning, linen changes, etc.)
Prices are typically higher than regular rental apartments, but cheaper than hotel rooms
Serviced apartments offer comfort and services similar to a hotel, but with a more home-like and private environment. They are ideal for those who want more flexible accommodation without a long-term rental agreement.
Legal requirements and restrictions for serviced apartments
If you plan to buy or develop a serviced apartment in Estonia, you need to consider the following legal aspects:
Registration - a serviced apartment must be officially registered as an accommodation business
Purpose of use - the property must be suitable for business activities
Condominium association consent - many condominium associations may restrict short-term rentals
These requirements apply equally to both individuals and businesses - no distinctions are made based on owner status. This means that even as an individual running a serviced apartment, you must follow the same accommodation business requirements that apply to professional operators.
Before purchasing a serviced apartment, it is definitely worth checking the specific purpose of use for the apartment and the condominium association regulations. In some buildings, short-term rentals may be prohibited or restricted, which would make operating a serviced apartment impossible.
Tax obligations for serviced apartment owners from 2025
The owner of a serviced apartment must account for the following tax obligations:
Value added tax – accommodation services are subject to VAT, which has historically been at a reduced rate of 9%, but as of January 1, 2025, it increased to 13%. This VAT rate increase directly affects the profitability of serviced apartments and may lead to increased service prices.
Income tax - earned income is taxable, whether as business income tax (22%) or as personal income tax
Social tax - if you operate as a sole proprietor, social tax obligations may arise
It is important to register with the Tax Board and keep proper records of income and expenses. It is particularly important to understand that running a serviced apartment qualifies as providing accommodation services, which differs from regular residential rental both in taxation and legal obligations. Regular consultations with an accountant help keep tax obligations in order and avoid future problems.
Practical tips for buying a serviced apartment
If you want to invest in a serviced apartment, keep the following tips in mind:
1. Location is crucial
For a serviced apartment, location is even more important than for a regular rental apartment. A good serviced apartment should be located:
In the city center or near tourist attractions
In an area with good transportation connections
In a safe neighborhood
In Tallinn and Pärnu, the demand for serviced apartments is greatest, but it is also growing in other cities like Tartu and Viljandi.
2. Apartment size and floor plan
The most popular are:
Two-room apartments (suitable for couples or small families)
Studio apartments (suitable for solo travelers or business travelers)
Apartments with a separate bedroom and living room
The optimal size for a serviced apartment is typically 30-60 m², which allows offering all necessary amenities while keeping administrative costs under control. Larger apartments may be more difficult to rent outside peak seasons.
3. Furnishings and amenities
A serviced apartment should be furnished with:
Quality and durable materials
Functional and comfortable
All necessary appliances (washing machine, dishwasher, etc.)
Good internet connection
Don't underestimate the importance of details – quality linens, proper kitchen equipment, and fast WiFi can be decisive for guests. It is also worth investing in well-planned lighting and comfortable seating areas that create a cozy atmosphere in the apartment.
