When renting a private apartment as a VAT payer, do you have to issue invoices?

Renting an apartment or part of it is a good and often practiced way to obtain additional income. However, in the case of entrepreneurs who are active VAT payers, it is very important that such a rental is properly documented and demonstrated for tax purposes. The fact that the activity provides a substantially different type of service than rental and the apartment is not corporate property is irrelevant.

Why is renting an apartment subject to VAT?

To understand why renting a private apartment should be subject to VAT, pay attention to the definition of economic activity in Art. 15 sec. 2 of the VAT Act. According to this provision, an economic activity is all the activities of producers, traders, service providers, including natural resource harvesters and farmers, as well as the activities of freelancers. Economic activity includes, in particular, activities consisting in the use of goods or intangible assets on a continuous basis for commercial purposes.

According to this definition, renting an apartment should be considered as a continuous commercial use of the goods. Therefore, the entrepreneur should document such income with the help of invoices and then take it into account when generating tax declarations.

Choosing the right rate

The VAT rate is another important aspect of renting a property. The fact that the entrepreneur must include the rental on the VAT declaration does not obligatorily mean that the tax will have to be paid.

Art. 43 sec. 1 point 36 of the VAT Act specifies that services in the field of renting or leasing real estate (or part of a real estate) of a residential nature for own account, exclusively for housing purposes, are exempt from taxation with tax on goods and services. In this case, the entrepreneur actually issues invoices to his sub-tenants, however, he applies the VAT rate “ex” on them. In addition, the rental income is shown on the declaration as tax-exempt income.

However, the above exemption does not apply to other types of rent - e.g. garages, commercial or residential premises, but for purposes other than housing. In this case, the standard rate of 23% VAT should be applied.

As you can see, if an active VAT payer decides to rent a flat, he must remember to complete the formalities. In the case of renting for housing purposes, such an action will not affect the company's finances in any way, but nevertheless it must be shown both in the form of invoices and tax declarations.