Do you rent a property and earn over 500 EUR from renting it in 2023?

Do you rent a property and earn over 500 EUR from renting it in 2023? 

Do you rent a property and earn over 500 EUR from renting it in 2023?
Don't forget about the obligation to pay income tax, even if you are not a self-employed individual and do not rent the property as part of your business activities.

You will be required to settle your tax liability for the year 2023 through the submission of a personal income tax return, within the statutory deadline by the end of March 2024 (or April 1st 2024 since March 31st 2024 falls on Sunday). You also have an option to extend this statutory deadline.

When taxing rental income, you can claim expenses related to the rental, therefore you adjust the tax base from which you ultimately pay tax.  

The scope of claiming tax expenses depends on whether you "classify" the property as "business property" or not. If you do not "classify" the rented property as business property, you can include in tax expenses:

  • Expenses for energy consumption (water, gas, heat, electricity),
  • Payments to the operations, repairs, and maintenance fund,
  • Fees for mandatory management of the residential building, expenses for services in the rented property, such as lighting and cleaning of common areas, elevator use and service, use of the laundry room, doorman, reception, security service costs,
  • Fees for TV, internet connection, chimney inspection and cleaning, septic tank cleaning,
  • Waste removal expenses (excluding local municipal waste management stamp duties).

If you "classify" the rented property as business property, which means you will keep accounting books or keep tax evidence in relation to operation of the rented property as business property (deciding to keep accounting does not automatically make you an accounting entity and entrepreneur), you can claim as tax expenses:

  • The same expenses as in the case where the property is not "classified" as business property (listed o, and additionally:
  • Acquisition costs of the rented property (in the form of tax depreciation),
  • Interest paid on loans related the acquisition of the rented property paid after the property is classified as business property,
  • Costs of the technical improvement of the rented property (in a prescribed manner),
  • Expenses for repairs and maintenance of the rented property,
  • Expenses for insuring the rented property,
  • Paid property tax.

"Classifying" the rented property as "business property" allows you to claim a wider range of related costs as tax expenses and, therefore, pay lower income tax on the rental income during the rental period.

However, please note that if you plan to sell the property in the future, the period after which the income from selling the property may be exempt from income tax differs depending on whether you have it classified as business property or not.

If you found this article interesting and have additional questions, we will be happy to assist you in assessing your situation, planning, preparing your income tax return, and calculating your tax liabilities.