What are the tax implications of renting commercial properties?
October 25, 2023 | 40,00 EUR | answered by Lorenzo Hartmann
Dear Tax Advisor,
I am Jens Schlosser and own several commercial properties that I rent out. In the past, I have not delved into the tax aspects of these rentals as I have primarily focused on managing and maintaining the properties. However, I now have more questions regarding the tax implications of these rentals and I am concerned that I may have made errors or not taken advantage of tax benefits.
Currently, I do not have a clear understanding of which income from the rental of the commercial properties is taxable and how it should be correctly reported in my tax return. Additionally, I am wondering if I can deduct expenses for the maintenance and modernization of the properties for tax purposes and how to properly calculate depreciation on the properties.
Furthermore, I am interested to know if there are any special tax obligations or opportunities for landlords of commercial properties that I have not considered. I want to ensure that I am handling my rentals correctly from a tax perspective and maximizing any potential tax benefits.
Therefore, my question to you is: What are the tax implications of renting out commercial properties and how can I ensure that I properly consider all tax aspects and utilize any potential tax benefits optimally?
Thank you in advance for your assistance.
Best regards,
Jens Schlosser
Dear Mr. Schlosser,
Thank you for your inquiry regarding the tax implications of renting commercial properties. It is completely understandable that you are concerned about possible tax errors or unused tax benefits and want to ensure that you are handling your rentals correctly.
First and foremost, income from renting commercial properties is generally taxable and must be reported on your tax return. This income falls under the category of rental and leasing income, which should be listed in Schedule V of your tax return. Taxable income includes rental income minus deductible advertising expenses.
Advertising and administration costs, maintenance and modernization costs, as well as depreciation on the properties can be claimed for tax purposes. Advertising expenses include costs for administration, maintenance, repairs, insurance, property taxes, or depreciation on movable assets in the property. For modernization measures, the costs can either be immediately deducted or depreciated over a longer period of time.
Depreciation on the properties themselves is done over the useful life of the building and is used to claim the decrease in value of the building over the years for tax purposes. The useful life and depreciation rates are legally determined and must be taken into account accordingly.
As a landlord of commercial properties, you may have specific tax obligations, such as VAT liability for commercial rentals or the application of declining balance depreciation for certain buildings. It is advisable to gain an overview of your tax obligations and options as a landlord and, if necessary, seek professional help to ensure that you correctly consider all tax aspects and optimize tax benefits.
I recommend discussing your tax situation with an experienced tax advisor who can assist you in optimizing your tax situation and correctly handling your rentals.
I hope that this information has been helpful to you and I am available to assist you further if you have any more questions.
Best regards,
Lorenzo Hartmann
