The rental of real estate is generally exempt in VAT. No VAT is charged on the rental, but you cannot therefore deduct the VAT charged to you. This applies to both the acquisition costs, as well as any maintenance costs and other costs related to a leased property. This can certainly be detrimental to both tenant and landlord in business relationships.
To solve this problem for business owners, there is the option of opting for taxed rentals. This is called opting out. You can opt out in two ways: (i) upon request to the tax authorities, or (ii) by opting in the lease. Practice shows that many mistakes are made when opting for taxable rental. These mistakes can lead the tax authorities to impose additional tax assessments. With real estate, the amounts involved are quickly significant. It is therefore important to ensure that all requirements are met when opting for taxable rental.
To opt for taxable rentals, there are several requirements:
- The tenant is a VAT business owner.
- The tenant uses the property for at least 90% for taxed activities (certain industries have a lighter 70% requirement).
- The property must be independently exploitable (for example: own entrance from outside, own facilities, etc.) .
- The property may not be used as a residence.
This includes the following information in the lease (or request):
- A description of the property with data from the land registry.
- the date on which the tenant's fiscal year begins.
- the date on which the lease takes effect.
- A statement that the rent is subject to VAT.
- A statement from the lessee that he uses the property for at least 90% (or 70%) for taxable sales.
Do you include the statement in the lease? Then you and the tenant must enter into this contract within 3 months of the start of the lease. The agreement must also be signed (on time) by all parties. This type of defect is common and the possible adverse consequences can be avoided at the front end by making sure you have a complete and correct lease agreement.
In the event that opting for taxable rentals has gone completely well, it is still important to ensure that the VAT settlement also goes well when the requirements are no longer met. When the requirements are no longer met, the tenant notifies the landlord and the tax authorities. You can also stipulate this contractually. This can be particularly relevant for new or recently remodeled properties that are still within the review period. The change from taxed to exempt rent can then lead to revision with the landlord. For more information on revision, see our news article on the subject.
Do you have questions about revision or other (VAT) issues within your company? Please contact us through your relationship manager, by email at btw@govers.nl, or by phone at 040 - 2 504 504.