And although the owner can certainly take care of these issues alone, it is worth taking advantage of the help of a professional accounting office.
This material is for informational purposes only and indicates issues that should be considered when settling a property for short-term rental. However, it should not be treated as legal advice in this regard. In the case of any decisions related to the settlement of the rented premises, the owner should each time obtain a tax interpretation and support of the accounting office.
Real estate purchase - with or without VAT?
Depending on the manner in which we will acquire a given property and how it will be used, it may be taxed at 8% or 23%, or be completely exempt from VAT. For example - if we are a natural person who does not conduct business activity and purchase a flat directly from the developer to reside permanently in it, it will be subject to VAT in the amount of 8%. This value will be included in the price of the premises, the cost of which we bear in full and we will not be able to claim VAT refund.
The purchase / sale of a flat may also be VAT-free or simply exempt from VAT. In the first case, we refer, for example, to real estate being a private property of natural persons, used to satisfy own residential needs of their owners. On the other hand, we are talking about VAT exemption when the flat is rented by the entrepreneur in order to run a business. However, if we purchase a property that is either exempt from VAT or is not subject to it, a tax on civil law transactions must be paid in the amount of 2% of the real estate value calculated from the market value - the cost is borne by the Buyer. It is also worth remembering that VAT at the level of 23% usually includes premises for non-residential purposes, such as service or commercial.
What, however, if the purchase of real estate is made by a person running a business or a partnership?
In such a situation, if we are an active VAT payer, we can count on its return provided that the intended purpose of the real estate allows it. What does this mean in practice? If we bought, for example, an apartment that we want to rent for residential purposes, we are not entitled to deduct VAT, because this type of activity is exempt from it. This also applies to other purchases related to this type of activity, i.e. payments for utilities, cleaning, monitoring etc.
However, the restrictions described above concern the owners of only those apartments or flats that are to be rented for long-term purposes for residential purposes, ie for several weeks or longer. This is due to the fact that the lease of residential premises for residential purposes is a VAT-exempt activity, which excludes the possibility of deducting input VAT on purchases related to such activity. However, if the flat is rented for VAT-taxed business, i.e. mainly in the form of a short-term rental, we can deduct VAT not only from the purchase of the flat itself, but also other related costs.
Settlement in cooperation with RentPlanet
In a situation in which the owner of the property will establish cooperation with us and have the premises in our management, RentPlanet becomes responsible for signing the contract with the guests of the apartment, who rent it, for example, as part of a holiday or weekend stay. It is then a short-term rental service, which is subject to a VAT rate of 8%. However, the cooperation between us and the owner is based on a long-term lease agreement, ie. it is taxed at 23%. In the situation where the owner is an active VAT payer, the settlement between him and RentPlanet is based on a standard VAT invoice. Owners who are not active VAT taxpayers can document the remuneration due to them by means of invoices / invoices (excluding VAT).
Short-term rental and income tax
Owners of real estate for short-term rental, who do not conduct business activity, can settle income tax in two ways:
- lump sum on registered income;
- on general terms according to the tax scale.
If the owner chooses the first option, he pays an income tax of 8.5%, provided that the value of registered income does not exceed PLN 100,000 per calendar year. When the tax threshold is exceeded, a tax of 12.5% should be paid on the amount exceeding this threshold. This limit applies to all owned and rented by the property owner, regardless of their type or contracts signed. What is important, income is taxable, therefore it is not possible to deduct from it costs, eg exploitation or depreciation.
In a situation in which rental income is settled on general principles, the property owner also has two tax thresholds. Thus, if the income in the calendar year does not exceed PLN 85 528, the tax is 18%. A surplus above the indicated amount is taxed at 32%. It is worth noting that the tax is charged on income, i.e. the difference between the rental income obtained and the costs incurred in connection with it (i.e. depreciation, repairs, utilities, exploitation, commission of rental companies, commuting to the leased object, etc.).
What is common for both settlement options is the need to pay income tax every month also on the income that the owner obtained from the lease.
The owners of real estate who run a business or a partnership may also use the same form of settlement, ie on general terms. An alternative option is to select a flat tax bill, which assumes that regardless of how much income was generated from renting a flat (income, the difference between income and expenses), income tax is always 19%. Decisions on this form of taxation should be made at the stage of registering the business activity.