Please note: This article reflects the opinion of Crocodilian. This is no legally binding information.
As a temporary housing agency, we cannot and must not advise you on tax issues.
Do landlords of a furnished apartment have to pay VAT? If so, when exactly? Is it also possible to let an apartment temporarily without paying 7% VAT?
Many landlords of Crocodilian ask us these questions. Most landlords would like to avoid the value added tax and/or do not want to concern themselves at all closer with this topic.
In addition, they also fear that their apartment will be too expensive for private tenants if 7% VAT is added to the rental price or that the rentability of the apartment will be restricted as a result. Under certain circumstances the landlords can even profit from the VAT obligation. The 7% input tax of your rental income can then be offset against the input tax of agency fees, other current expenses, or the acquisition costs for furniture and equipment.
The question as to whether temporary letting is subject to VAT cannot be answered in general. It always depends on the individual case.
Our tip: Clarify all detailed questions to the VAT with your tax consultant.
- No VAT for renting out furnished apartments
Good news: If your income from temporary rentals is less than 17500 euros and you do not expect to earn more than 50,000 euros in the following year, you will not be liable to VAT. Then you are subject to the small business regulation §19 (1) UStG anyway. However, this only applies if you do not receive any further income from other entrepreneurial activities.
- Higher total turnover and other entrepreneurial activities
If the landlord is entrepreneurial, the situation is different. In this case the turnover limits of 17500 and 50 000 Euro do not only refer to the turnover achieved with the letting. Here the total turnover is decisive, i.e. all income which the landlord earns through entrepreneurial activities. These will then very probably exceed the 50,000 euro limit. This means that the landlord is no longer subject to the small business regulation. In this case he must calculate with 7% VAT on the rent, e.g. when letting of a vacation home to tourists.
What are the legal requirements for temporary rentals?
In Berlin, the ban on misappropriation of apartments (Zweckentfremdungsverbot) has already been in force for several years. Accordingly, landlords may not rent to tourists without a permit, but only to people who come to Berlin to work or to trainees.
The target group for temporary accommodation in Berlin are people who would like to live in Berlin for a longer period of time and who also register here. The vast majority of tenants register, because without an address they cannot open a bank account, get no Schufa and also no mobile phone contract.
Difference of long- and short-term letting
The legislator distinguishes between long-term and short-term rentals, normal, permanent rentals and short-term rentals (“rentals of residential and dormitories for short-term accommodation”).
There is no sales tax on normal, long-term letting of residential space.
Short-term rentals – include:
- Letting of holiday apartments to tenants who are “for pleasure” temporary in Berlin
- Letting to persons who work in Berlin for a limited period of time. For example, the tenant has a three-month work stay in Berlin and then returns to his home town.
Indications of long-term, “permanent” letting are the following:
- Either the tenant is staying in Berlin for more than 6 months
- Or the tenant is in Berlin, has a job here, is registered in Berlin and pays taxes here.
Tip for landlords of furnished apartments:
Talk to your tax advisor
Most tax consultants, if they are not specialized in real estate, are understandably not familiar with temporary letting. Therefore, the question of whether 7% VAT has to be charged on the rent is usually answered in the affirmative.
It would be useful if you explained this leasing model to the tax consultant. The tax office has a lot of room for manoeuvre, so it is worth considering details instead of classifying everything as a short-term letting.
For tenants who rent on a temporary basis, the rented apartment is the first place of residence. The amount of tenants who only spend a short time in Berlin to work here for a limited period is much lower.
Many tenants first rent for a few months and then extend their lease again and again. Most tenancy agreements include an extension option. In our opinion, the extension option also contradicts the short-term nature of the lease.
As a small entrepreneur with a maximum rent of 17500 Euro – and no further income from commercial activities, you are not subject to sales tax.
All other landlords with higher incomes should consult their tax consultant and explain the rental model in detail.