Since 2016 a natural person may deduct twenty per cent from the income from rent for covering the expenses related to the residental building or apartment. No need to submit expense receipts for this. Twenty per cent shall be deducted in the case of declaring the income from rent based on the income tax return. The deduction shall be made for the first time on the basis of the 2016 income tax return to be submitted by 31 March 2017.
Twenty per cent from the rent shall be deducted in the case of renting a residential building or an apartment on the basis of a lease contract of a dwelling. A lease contract of a dwelling is in question if the dwelling is leased and it is agreed on concluding the contract that this shall be used for living in. For example, if a company rents an apartment for the purpose to keep an office there, then the fact that the apartment in itself can be used for living in shall not change the lease contract into the lease contract of the dwelling.
Accessory expenses and encumbrances (duties) related to the rent shall not be considered as the income from rent (i.e. the amount from which the deduction is made), if the lessee has paid these himself/herself or compensated to the lessor.
The amount agreed by the lease contract is 200 euros per calendar month and, pursuant to the contract, the lessee shall pay the utilities on the bases of the invoice submitted by the apartment association. The lessee shall pay 200 euros to the lessor and 150 euros to the apartment association on the basis of the invoice. The lessor shall declare the income from the rent of 200 euros for that calendar month.
The amount agreed by the lease contract is 200 euros per calendar month and, pursuant to the contract, the utilities of the apartment association paid by the lessor shall be added to this amount. The lessee shall remit the amount of 350 euros to the lessor. The lessor shall pay 150 euros to the apartment association on the basis of the invoice. The lessor shall declare the income from the rent of 200 euros for that calendar month.
The summary rent amount in the year must be indicated in the income tax return.
Such duties paid by the lessee that are related to the good condition of the apartment house or the residential building shall not be considered as the income from rent. For example, the expenses for snow clearing around the apartment house shall be considered such a duty. However, loan payments taken for the acquisition of a rented dwelling or the land tax can be considered neither accessory expenses nor encumbrances, and if the lessee pays these instead of the lessor, these shall be considered as the income of the lessor.
The lessee and the apartment owner have agreed that the lessee shall pay the loan payments taken for the acquisition of the apartment instead of the rent. The owner shall have to declare the loan payments paid for him/her as the income from rent.
If the lessee has made improvements for the rented dwelling whereby the value of the dwelling has increased and if the lessor does not compensate these expenses when terminating the lease contract, the increase in value of the dwelling let out on hire shall be the lessor’s income as compared with the value of the dwelling at the conclusion of the contract. However, if the lessee does restoration repairs whereby the value of the apartment or residential building has not increased as compared with the value at the conclusion of the contract, this shall not create the taxable income to the lessor.
If a lease contract has been concluded with a legal person, the legal person must withhold the income tax from the gross amount of rent, except accessory expenses and duties. Twenty per cent of overpaid income tax on the income from rent shall be refunded to the lessor on the basis of the income tax return.
If a residential lease contract is concluded with a legal person and the rent payable under the contract is 200 euros per month, then the lessee (legal person) shall be obliged to withhold income tax from the rent at a rate of twenty per cent (40 euros). A natural person shall be paid 160 euros (200 – 40 = 160). The lessee shall be obliged to declare the payment of the rent on the gross amount (200 euros):
- under code 57 of Annex 1 to tax return TSD – if the payment is made to a resident natural person or
- under code 185 of Annex 2 to tax return TSD – if the payment is made to a non-resident natural person.
This income shall be entered into the precompleted income tax return of the natural person, whereas the lessee has declared the payments made under the residential lease contract. According to the income tax return submitted, the taxable income for the dwelling shall be reduced by twenty per cent and the income tax shall be recalculated accordingly: the income tax shall be 32 euros ((200 – 20% × 200) × 20%). However, it should be taken into account that annual income and permitted deductions shall have an effect on the final amount of the income tax calculated on the basis of the income tax return.
If the dwelling is granted of use for accommodation of people, then the deduction of twenty per cent cannot be made and the income received shall be declared under types of income as the income from rent. For example, the private person, granting the dwelling of use for temporary accommodation through AirBnB or booking.com and it is not a business operation to him/her, must indicate the gross amount of income in his/her income tax return wherefrom no expenses (including service fee) cannot be deducted. Likewise, no twenty per cent deduction can be made, and the income received, pursuant to the contract the purpose whereof is to sublet the dwelling, must be declared under types of income as income from rent.