Option to choose value added tax
January 4, 2011 | 25,00 EUR | answered by Michael Herrmann
Dear Sir or Madam,
My concern is as follows:
I lease a small apartment that has been leased by a hotel operator as part of a hotel. So far, the lease has been invoiced or received by the tenant without sales tax. He has now written to me on the advice of his tax advisor that he is advocating for the option of sales tax in order to be able to claim input tax in the future. For this, it would be necessary for me to opt for sales tax.
Here is my question: Can I do this as a private individual, will this have any consequences for me in the future, or what changes for me?
I would greatly appreciate your advice on this matter.
Kind regards, Bernd Weber
Dear inquirer,
First of all, thank you very much for your inquiry, which I would be happy to answer based on your information and in the context of your initial consultation. The response is based on the facts provided. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Opting for VAT liability has far-reaching consequences for you.
From a tax perspective, private renting becomes a commercial activity. The apartment becomes part of the business assets. Therefore, you must prepare a profit determination. However, this is only slightly more complex than the previous income determination. The amount of income will not change either. However, it is disadvantageous that once you establish the commercial activity, all increases in the apartment's value until the cessation of the business will be "taxable." This means that you will have to pay tax on the increases in value and the depreciation claimed at the end. This is not the case with private renting. This is one of the few remaining tax loopholes.
From a VAT perspective, you must tax the rent with 19% VAT. This amount is added to the current net rent. The tax must be reported and paid to the tax office monthly, quarterly, or annually, depending on the amount. At the end of the year, a VAT declaration must be submitted. In return, you can deduct the VAT paid (input tax) from invoices from the tax debt.
Based on your information, I cannot assess whether the refunded input tax offsets the expense of the tax returns and the tax disadvantage in terms of income tax, but I doubt it based on experience.
I hope this information has provided you with a sufficient overview of the situation within the scope of your inquiry and this initial consultation.
Best regards,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax Advisor
