Tax obligations when renting real estate
Registration obligation for income tax when renting real estate
A person who leases real estate as a non-entrepreneur is obliged to apply to the tax administrator for registration by the end of the calendar month after the end of the month in which he leased the real estate. In the case of immovable property which is jointly co-owned by the spouses, the registration obligation applies to the spouse who has entered into the lease and is therefore listed in it as the lessor. If both spouses are designated as lessors in the contract, both spouses are obliged to register. The lease of land is exempt from the registration obligation if the landlord is not an entrepreneur. However, this does not mean that the landlord does not have to pay tax on this income. Based on the Application, the tax office will issue the Applicant with a Tax Identification Number - VAT No.
Income from rental of real estate with a non-entrepreneur
The Income Tax Act stipulates that rental income includes income from the rental of real estate, including income from the rental of movable property, which is leased as an accessory to real estate.
Simply put, these are rents agreed in the lease agreement and also payments for services associated with the use of real estate (energy, waste collection, etc.). According to the guidance of the Tax Directorate, payments related to the use of real estate are taxable income if the lessee pays them directly to the landlord, but also then; if their tenant pays directly to suppliers of energy and services (power plants, gas stations, waterworks). The only exception where payments for payments related to the use of real estate are not considered taxable income by the lessor is when the lessee pays them directly to the energy supplier, and the contract with the energy and service supplier is also concluded directly by the lessee. If the property is jointly co-owned by the spouses, the income from the rental of the property may be shared by the spouses in equal shares or in any other proportion, whichever they consider more advantageous.
Expenditure on renting real estate to non-entrepreneurs
A landlord who does not have a leased property included in his commercial property is limited in the application of tax expenses in that he can deduct only demonstrably incurred expenses for basic services related to the use of real estate, such as expenses for the so-called. energy (electricity, gas, water), drainage of waste water, removal of municipal waste, cleaning of common areas in the house, etc. If the lessee pays for the energy and other services directly to the supplier, the lessor may still claim such expenses as a tax expense. The only exception where energy payments are not considered as a tax expense by the lessor is when the lessee pays them directly to the energy supplier, on the basis of a contract concluded with the energy supplier by the lessee himself.
Source: Real Estate Union brochure: "Sale, purchase, rental of real estate", www.realitnaunia.sk