What do I need to know about renting out a holiday flat?
Wenn Sie Ihr holiday home for tax purposes claim, you must overcome some significant hurdles, as the tax authorities will only contribute if the primary focus of the property is on rental. You must demonstrate a profit-making intention to the tax office. Expenses and losses for a holiday property can only be deducted if the primary aim is to generate profit through rental. This is where the main issue lies. If you cannot convincingly demonstrate to the tax office that you intend to make money from the holiday home, it will be considered a "hobby", and there will be no tax savings. The simplest way to prove the intention to make a profit is not to use the holiday home yourself initially. You can demonstrate this to the tax office with, for example, an estate agent contract that excludes personal use for the entire year. Additionally, you must also demonstrate to the tax office the intention to make a profit through rental:
According to a decision by the Federal Fiscal Court (Ref: IX R 57/02), the property should be rented for at least 75 per cent of the local rental period. If such a rental period cannot be achieved, a profit forecast over a 30-year period must show that a rental surplus can be achieved during this time (BFH: Ref IX R 97/00). This profit forecast must also be submitted if the holiday property is to be used privately. If the forecast concludes that a surplus is not expected within the 30-year period, the advertising costs will not be recognised.
In this case, however, the rental income does not have to be taxed either. If the profit forecast is positive, the tax office must recognise the costs. The deductible rental periods are then compared with the non-deductible periods of personal use. The longer the rental period, the more can be deducted. Any potential vacancy can also be included in the rental period, for example, if it was precisely determined in advance when the holiday home would be used personally. Otherwise, the vacancy will be divided according to the ratio of rental to personal use.
What figures are specifically important? The Federal Fiscal Court has recently addressed this question and issued a ruling that may help affected holiday home owners. When determining the benchmark for occupancy rates, only the local rental period for holiday homes should be considered, not for all accommodation establishments in a town. Therefore, the benchmark is significantly lower than assumed by the tax authorities (BFH ruling of 26.5.2020, IX R 33/19).
If the tax office recognises all points, acquisition and financing costs as well as heating, electricity or repairs can be deducted for tax purposes. Especially in the first few years, for example due to loan interest, expenses may exceed income, which can reduce taxable income.
Current: The Federal Fiscal Court has commented on how to proceed if a landlord owns a holiday home with several apartments that are used differently over the years, for example, initially for long-term rental and later as a holiday apartment. Is the profit-making intention to be checked separately for each apartment or for the entire property?
The Federal Fiscal Court has decided that it depends on each individual apartment. It also ruled that the question of whether a total surplus can be achieved must be reassessed in the event of a change of use. This is the case, for example, if an apartment is initially rented out long-term, then renovated and subsequently used as a holiday apartment (BFH ruling of 8.1.2019, IX R 37/17).
Tax classification of holiday apartment rentals
Current: When renting out a holiday apartment, the question may arise as to whether income from renting and leasing or income from a business is generated. In the latter case, business tax may be incurred, but more importantly, the apartment would always be "tax-bound" and a profit from the sale of the apartment would be taxable even outside the ten-year speculation period. The tax authorities stipulate that a business is assumed if the holiday apartment is used like a hotel or rented out like a guesthouse. The decisive factor is whether, due to the frequency of guest changes or in view of additional services provided alongside the use, such as the provision of laundry and furniture, room cleaning, a business organisation is required, as is also the case in guesthouses (EStH H 15.7 (2) to § 15 EStG).
However, as early as 2020, the Federal Fiscal Court made a remarkable decision: The landlord of a holiday apartment does not generate income from a business if the intermediary entrusted with the fiduciary rental offers it in a hotel-like manner but has its own economic interest in the fiduciary position, particularly because it provides hotel-type additional services at its own expense or for the account of third parties (BFH ruling of 28.5.2020, IV R 10/18).
The facts: The claimant owns three apartments in a larger complex. A hotel is integrated into this complex. The apartments are rented out to changing holiday guests via a rental or intermediary company. If necessary, the company may also rent out the apartments as hotel rooms and offer additional services such as breakfast, half or full board, daily cleaning with towel and linen changes. In the years in dispute, the company invoiced guests for the hotel stay, including breakfast and additional services (e.g. tourist tax, parking space, pets, etc.) in its own name. It also settled commissions with booking portals. It prepared quarterly statements for the owners.
In the end, it returned the amounts to the claimant, minus the "laundry share", "final cleaning/hotel service share" and "F&B share", less commission. The tax office and tax court assessed the rental as a business activity, as the apartments were rented out as hotel rooms rather than holiday apartments. However, the BFH sees the matter differently.
The involvement of a commercial intermediary does not automatically mean that the landlord is engaged in a business activity. The decisive factor is rather the extent to which the rental of a holiday apartment by the landlord, in terms of the type of rented object and the type of rental, is comparable to a commercial accommodation business. The actions of the commercially active rental or intermediary company cannot be attributed to the claimant due to a fiduciary relationship or civil law representation. This applies, as in the case in dispute, if the rental or intermediary company has a significant own economic interest in the fiduciary position. Since the claimant could not be attributed the commercial actions of the rental company in the court case, she did not generate business income from renting out her apartments, but income from renting and leasing.
(2023): What do I need to know about renting out a holiday flat?
What do I need to know about rental income?
As a landlord, you must declare the basic rent and any service charges passed on to tenants as additional income. The costs incurred in this context can be deducted as income-related expenses.
Examples of rental income:
- Rental income for flats or rooms
- Rental income for garages/parking spaces
- Service charges passed on to the tenant
- Rent for advertising spaces and vending machine sites
- Interest on credit balances from building society contracts
- Compensation payment from a tenant for early termination of the lease
- Leases for undeveloped land
- Income from a hereditary building right
If rental income is below the 520 Euro annual threshold (e.g. for subletting), you can omit this information from your tax return. Income up to this threshold from temporary letting is exempt from income tax. This also applies to the temporary subletting of parts of your own rented flat. In this case, no corresponding income-related expenses can be claimed.
Note: From 1 January 2024, a new tax exemption threshold for rental income is to be introduced: Income from renting and leasing will remain tax-free if the total income is less than 1.000 Euro (§ 3 No. 73 EStG, introduced by the "Growth Opportunities Act").
(2023): What do I need to know about rental income?
