Tips and information for private landlords whose rental property is not a business asset.
Who can find answers here?
This article was written for all those landlords who record their income using the "rental and leasing" income method. These are private landlords whose rental income is not included on a financial statement. The information provided is based on Austrian tax law.
What fees are due on existing contracts at closing?
Landlords know the procedure. When concluding a rental agreement, please fill out the form Geb1 (notification of self-calculation of fees pursuant to § 33 tariff item 5 line 3 of the Fee Act [GebG] 1957) and send it to your competent tax office. A charge of around one percent of the assessment basis is due for existing contracts.
They have to calculate the fees themselves. As a rule, however, they leave this to their tax advisor. If you still want to try yourself: a relevant declaration for self-calculation is provided by the Federal Ministry of Finance.
Is income tax due for private renting and leasing?
Income tax can be quite a burden on the wallet. Nevertheless, almost all landlords have to pay tax on income. Only those landlords whose total annual income does not exceed the exemption limit are exempt from this regulation. For more information see "What is the income tax rate??".
Every type of rental and leasing is subject to income tax. By the way, this also applies to the private rental of one's own home via online platforms. These are since 01.01.2020 required by law to keep records of income generated on the platform and send them to the tax office.
Those who do not pay tax on their income from rentals and leases must expect severe penalties!
Only way out: timely self-disclosure can prevent a penalty. A self-disclosure is considered timely if it is made before the authorities discover it.
How high is the income tax rate?
There is not a single tax rate, but several rates, depending on turnover. The income from renting and leasing is thereby determined by the income under deduction of the income-related expenses (expenses).
No income tax is paid by the "very small", namely landlords whose total annual income is less than 11.000 euros. 11.000 euros a year – that's around 916 euros a month. Mind you: We are not only talking about the income from renting and leasing, but about the total income.
In reality, this exemption can only be claimed by very few entrepreneurs (to which landlords can also be counted). For employees, by the way, there is a somewhat higher exemption limit of 12.600 Euro per year. All landlords whose income exceeds these exemption limits are liable to income tax.
Tip: If you want to avoid official channels, choose an accounting program that is designed as browser software and linked directly to the tax office. Good accounting programs, such as Freefinance or Sevdesk, contain all the forms needed to process sales and income tax, automatically send sales tax reports to the tax office and provide an overview of income and expenses during the current year. With the appropriate software, rent estimates can be created, income and expenses can be booked and the E1B form can be created and sent automatically to the tax office.
What belongs to the income-related expenses?
Tax law uses the term "maintenance costs" to refer to expenses and expenditures incurred when renting and leasing out property. The following expenses fall under this:
- Deduction for wear and tear (AfA)
- operating costs
- Interest on financing
- Maintenance costs
- subsidized renovation costs
- Maintenance costs
- Placing of housing advertisements
- Property tax
- Consulting costs
- Property management
- Real estate agent fees
- Travel expenses
The placement of housing advertisements is also tax deductible!
He who does not honor the cent is not worth the euro. In addition to the cost items already mentioned, which can often add up to a lot of money, the placement of housing advertisements is also tax-deductible. No matter how many times you advertise and how successful the respective advertisement was, all related expenses are included as "income-related expenses" in the determination of income from renting and leasing, and thus have the potential to reduce the tax burden.
If the purchase of a building for renting was financed by means of a loan, the interest portions paid may be tax deductible.
Deduction for wear and tear (AfA)
With the date of acquisition of a still vacant property for the purpose of rental, a deduction for wear and tear (AfA) can be made. The depreciation rate is 1.5. The AfA applies to real estate, but not to land.
Deducting production expenses and maintenance expenses
Many expenses can be deducted immediately, but some can also be deducted over a period of 15 years. One differentiates here between the production expenditure and the maintenance expenditure.
While in the case of production expenses the value of use of an object
If the value of the property is increased and its useful life is extended, measures that are classified in tax law as maintenance costs are only suitable for restoring the property to its proper condition. Only favored production expenditures can be depreciated by way of AfA over a period of 15 years. Maintenance costs, on the other hand, are immediately deductible.
Manufacturing expenses include, but are not limited to:
- Addition of a floor
- Conversion of the attic
- Conversion of an apartment into commercial space
- Installation or. Installation of a heating system
- Installation of a passenger elevator
- Raising the category by installation of wet rooms
- Moving partition walls
- Relocation of doors and windows
Apartment consolidations can also be written off as a manufacturing expense.
Beneficiary production expenses include:
- Subsidized renovation measures
- Renovation measures within the framework of the law on the protection of historical monuments
Maintenance expenses include:
- Minor repairs
- Painting work
- Painting the facade
- Repair work on the roof
- Replacement of a door or window
- Replacement of some windows
- Roof renewal
- Renewal of the roof truss
- Staircase renovation
- Renovation of floors, partition walls and false ceilings
- Renewal of the heating system and the associated installations
- Renewal of wet room installations (including tiles and flooring)
- Renewal of the facade incl. Thermal insulation
- Drying of walls
When is income from renting and leasing subject to VAT??
Income from renting and leasing is always subject to sales tax. However, there are exceptions, as always. No VAT is payable by small entrepreneurs whose net annual turnover is less than 35.000 Euro. In this case it is called "non-genuine tax exemption.
Non-exempt landlords do not collect sales tax and therefore do not pay any to the tax office. In return, they also lose their right to deduct input tax. In many cases this is counterproductive, namely when you as a landlord incur a lot of expenses.
Value added tax when renting out business premises
The leasing of business premises is subject to the non-genuine exemption from tax, but this also means that one is not entitled to deduct input tax in this case either. Business premises with non-genuine tax exemption include offices, storage places, doctors' offices, stores, halls, sports fields, etc.
In certain cases, it is worthwhile to voluntarily switch from the non-genuine tax exemption to the tax liability. Input taxes have to be adjusted when changing ownership. There is also a lot of leeway for landlords of several apartments. In fact, if a landlord who rents out more than one property decides to opt from the non-genuine exemption to the standard tax rate with one commercial space, the change does not automatically apply to all his rented properties. It is possible to choose a form of taxation for each individual rental object separately.
Value added tax when renting out residential premises
When renting out residential premises, the reduced tax rate of 10% applies. This tax rate applies to all rental income except for heating expenses, which are taxed at 20%.
The standard tax rate of 20% also applies to the rental of garages, parking spaces, movable furnishings and the short-term rental of a business premises whose original purpose is to be rented out as living space and whose tenancy lasts no longer than 14 days.
Information on the topic of "renting and leasing" on the WKO website.
This article was written to the best of our knowledge and belief. However, it is for information purposes only, and does not replace personal consultation with a tax advisor. No responsibility can be taken for the correctness of this information.