Do I have to pay sales tax on rental income?
December 6, 2022 | 50,00 EUR | answered by Oliver Götzinger
Dear tax advisor,
My name is Eiko Koch and I operate a small rental business. Over the past few years, I have acquired several properties and rent them out to individuals and businesses. I have always declared my rental income as income from leasing and renting out property and paid income tax accordingly.
However, I have recently heard that rental income may also be subject to value-added tax. This has made me somewhat uncertain, as I have not previously paid value-added tax on my rental income. Therefore, I am wondering if I will have to pay value-added tax on my rental income in the future and how I can correctly account for this.
I am concerned that I may have to make tax repayments if I have acted incorrectly in the past. At the same time, I want to ensure that I fulfill my tax obligations correctly and avoid any legal issues.
Could you please explain to me if I have to pay value-added tax on my rental income and how I can account for this correctly? Are there any exemptions or special regulations that may apply to my rental business? I look forward to your expert advice and thank you in advance for your help.
Sincerely,
Eiko Koch
Dear Mr. Koch,
Thank you for your inquiry regarding the value-added tax on your rental income as a landlord. It is understandable that you may feel unsure about your tax obligations and want to ensure that you are accounting for everything correctly.
In general, the rental of properties is exempt from value-added tax if you, as the landlord, do not provide any taxable services in addition. This means that you usually do not have to pay value-added tax on your rental income. The rental of residential properties to individuals is typically exempt from value-added tax.
However, it is different when renting commercial properties to companies. In this case, you may have to charge value-added tax on the rental income. The rental of commercial properties to companies is generally subject to value-added tax. Therefore, if you rent commercial properties to businesses, you will typically have to charge value-added tax on the rental income and remit it to the tax authorities.
It is important that you carefully examine your rental activities and determine whether you are subject to value-added tax or not. If you have not been remitting value-added tax on your rental income so far, you should clarify this as soon as possible and, if necessary, register and remit value-added tax retrospectively. Usually, you can hope for a tolerance regulation that allows you to register the value-added tax retrospectively without having to face penalties.
There are also exceptions and special regulations in the value-added tax law that may apply to your rental business. Therefore, it is advisable to seek advice from a tax advisor or a value-added tax specialist to ensure that you fulfill all tax obligations correctly and avoid any legal issues.
Overall, I recommend that you carefully examine your rental activities in relation to value-added tax and, if necessary, seek professional help to ensure that you are accounting for everything correctly and do not have to make any tax repayments.
I hope this information was helpful to you, and I am happy to assist with any further questions.
Best regards,
Oliver Götzinger
Tax Advisor
