What tax aspects need to be considered when renting out vacation apartments?
November 30, 2022 | 50,00 EUR | answered by Otto Dornbusch
Dear tax advisor,
My name is Paula Rothwiller and I have recently started renting out holiday apartments. However, I am unsure about the tax aspects I need to consider. I have only been dealing with income tax returns for my regular income so far and therefore have little experience with the taxation of rental income.
Currently, I rent out two holiday apartments to tourists and generate a total income of 15,000 euros per year. I have heard that there may be various tax regulations when renting out holiday apartments, such as regarding value-added tax liability or depreciation options for the properties.
My concerns mainly lie in possibly overlooking tax obligations and getting into tax difficulties as a result. Therefore, I want to ensure that I correctly pay all necessary taxes and fully utilize any potential tax benefits.
Could you please explain in detail what tax aspects I need to consider when renting out holiday apartments? What taxes are involved and how can I optimize my tax situation? Are there any specific regulations or peculiarities that I should be aware of as a holiday apartment landlord?
Thank you in advance for your help and support.
Best regards,
Paula Rothwiller
Dear Mrs. Rothwiller,
Thank you for your inquiry regarding the tax aspects of renting vacation apartments. It is understandable that you may feel uncertain, as the taxation of rental income does indeed have some particularities. Below, I will explain the most important tax aspects that you should consider when renting vacation apartments.
Firstly, you must declare the income from renting your vacation apartments in your income tax return. The income is subject to income tax and must be taxed accordingly. The amount of tax depends on your personal tax rate and the deductible advertising costs related to the rental of the vacation apartments. Advertising costs include, for example, maintenance costs of the apartment, property tax, insurance, management fees, or depreciation of the building.
Furthermore, you must determine whether you need to charge VAT on rental income. Typically, landlords of vacation apartments are liable for VAT if they offer short-term rentals, i.e., rentals of up to six months. In this case, you must calculate VAT on the rental income and remit it to the tax office. However, you can also opt for the small business regulation and waive the collection of VAT if your annual turnover falls below certain limits.
Moreover, you have tax depreciation options available for your properties. You can depreciate the acquisition or production costs of the vacation apartments over the useful life and thus reduce your tax burden. It is important to be familiar with the different depreciation options and apply them correctly to maximize tax benefits.
Additionally, as a landlord of vacation apartments, you also have certain tax obligations to fulfill, such as filing VAT returns, maintaining proper accounting records, and preparing tax returns. It is advisable to seek professional support from a tax advisor to minimize potential tax risks and optimize your tax situation.
Overall, it is important that you thoroughly familiarize yourself with the tax aspects of renting vacation apartments and understand all relevant regulations and specifics. Only then can you ensure that you correctly remit all necessary taxes and optimize your tax situation.
I hope this information is helpful and I am available for further questions. Please do not hesitate to contact me if you need additional assistance.
Best regards,
Otto Dornbusch, Tax Advisor
