Renovation costs of a commercial rental property
October 17, 2010 | 30,00 EUR | answered by Gabriele Hellenbroich
Dear Sir or Madam,
The situation is as follows:
In the three-family house, there is a condominium owned by me and rented to my partner, in which she operates a business. The other two condominiums belong to my partner, one of which is rented to me for residential purposes. The third one is occupied by her.
We are planning to renovate the entire building later this year. This includes replacing all entrance doors, as well as terrace doors in the ground floor apartments.
1. Question: Can the invoice for the apartment rented by my partner and used for commercial purposes be covered, so that the incurred value-added tax can be deducted as input tax? If yes, how should the net invoice amount be considered in terms of expenses?
2. How should the amount for the apartment rented to me and for the self-occupied apartment be treated for tax purposes?
Thank you for your support.
Dear inquirer,
First of all, thank you for your inquiry, which I am happy to answer based on the information provided and in the context of your initial consultation. The response is based on the description of the situation. Missing or incorrect information regarding the actual circumstances can affect the legal outcome.
The entire invoice cannot be processed in the way you envisioned. The renovation needs to be considered separately. In order to be able to claim at least a portion of the input tax, I would recommend allocating the doors to the respective apartment and owner.
Entrance door of the commercial rental apartment:
Input tax deduction is only possible if you lease for VAT purposes. In that case, it must be done by you. If the tenant is responsible for the repair according to the lease agreement, the invoice should be issued to the tenant, who can then claim the input tax and deduct it as a business expense, resulting in savings on trade tax and income tax.
Entrance door of your rental apartment:
Your partner cannot claim input tax as it is used for residential purposes. However, it can be included in the miscellaneous expenses on Section V.
Entrance door of your partner's unit:
Input tax cannot be claimed. There is also no possibility for income tax deduction as there are no earnings due to self-occupation.
The terrace doors should be treated similarly.
Entrance door of the house: This expense should be borne by the owners and can be claimed proportionally. One third is non-deductible (your partner's apartment), one third is to be assessed like the entrance door of the commercial rental, and one third like the residential rental.
To avoid disputes with the tax office, I recommend issuing separate invoices, as you will not be jointly taxed and the ownership situations are not the same. I have assumed that partial ownership exists and that a unified and separate profit determination does not need to be made.
I hope that these explanations have provided you with a sufficient overview of the situation within the scope of your inquiry and remain
Yours sincerely,
Gabriele Hellenbroich
Tax consultant
