What is included in income from renting and leasing?
What is included in income from renting and leasing (Form V) is regulated by the Income Tax Act. Section 21 of the Income Tax Act mentions the following types of income:
- Income from renting and leasing of immovable property (land, buildings, parts of buildings, ships registered in a shipping register)
- Income from renting and leasing of rights equivalent to land (e.g. hereditary building rights, mineral extraction rights)
- Income from renting and leasing of business assets, particularly movable business assets (e.g. business inventory for commercial enterprises, agricultural businesses or freelance practices)
- Income from the temporary transfer of rights, particularly literary, artistic and commercial copyrights
- Income from the sale of rental and lease payment claims
Not included as rental income are revenues from renting out individual movable assets. This applies, for example, to the rental of individual pieces of furniture, the chartering of boats not registered in a shipping register, or the temporary lending of private vehicles, for example for a holiday trip.
What is included in income from renting and leasing?
What do I need to know about renting out a holiday flat?
What do I need to know about renting out a holiday home?
If you wish to claim tax deductions for a holiday home, you must meet the strict requirements of the tax office. The central point is the intention to make a profit: The tax office only recognises advertising costs if the property is predominantly used for rental. Find out what you need to consider to claim your holiday property for tax purposes and why "hobby" could be a problem here.
Requirements for tax deduction
To deduct expenses for a holiday home as advertising costs, you must prove that the property is predominantly rented out. The easiest way to do this is to completely exclude self-use. An estate agent contract confirming exclusive rental throughout the year makes it easier to provide proof.
If the holiday home is only partially rented out, the rental rate must be at least 75% of the local rental period (BFH ruling, Ref: IX R 57/02). If this value is not reached, the tax office requires a profit forecast over 30 years showing a surplus from the rental (BFH ruling, Ref: IX R 97/00). This forecast is also required if the holiday property is partially used by the owner.
Hobby: What does it mean?
If you cannot convincingly demonstrate the intention to make a profit to the tax office, the rental will be classified as a hobby. In this case, no advertising costs can be deducted. A hobby exists if the main purpose of use is not rental for profit, but private use. If the profit forecast is negative, you do not have to pay tax on the rental income, but you also cannot claim any costs for tax purposes.
Vacancy and rental periods
Periods of vacancy can also be taken into account for tax purposes, provided they are clearly attributed to rental. In the case of partial private use, the vacancy is divided proportionally according to the rental and own use ratio.
A helpful ruling by the Federal Fiscal Court (BFH, Ref: IX R 33/19) states that when calculating the local rental period, only holiday homes may be used as a benchmark, which can make tax recognition easier.
Intention to make a profit with multiple properties
If you own several holiday homes, you must prove the intention to make a profit for each individual property according to the BFH ruling (Ref: IX R 37/17). This is particularly important if the use changes, for example between long-term rental and holiday rental.
Business tax and holiday homes
If the rental of your holiday home is run like a hotel business – for example, with frequent guest changes or the offering of additional services such as cleaning or breakfast – the tax office may classify the income as commercial activity. This could lead to the payment of business tax and make the sale of the property taxable even after the ten-year speculation period (EStH H 15.7 (2) to § 15 EStG).
However, the Federal Fiscal Court (BFH, Ref: IV R 10/18) has ruled that commissioning a commercial agent does not automatically lead to a commercial activity by the landlord, as long as there is no own economic interest in hotel-like rental.
Conclusion
The intention to make a profit is crucial for claiming your holiday property for tax purposes. If this is missing or private use predominates, the tax office will classify the rental as hobby. Ensure compliance with local rental periods and provide a positive profit forecast to secure tax benefits.
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 as well as the service charges passed on to tenants as income. The costs incurred can be deducted as advertising costs for tax purposes.
Examples of rental income
Rental income includes, among other things:
- Rental income for flats or rooms
- Rental income for garages or parking spaces
- Service charges passed on to the tenant
- Rent for advertising spaces and vending machine sites
- Interest credits from building society contracts
- Compensation payments from tenants for early termination of the lease
- Leases for undeveloped land
- Income from a hereditary building right
Tax allowance for low rental income
If your annual rental income is less than 520 Euro, for example through subletting, you can omit this from your tax return. This income, which comes 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, however, no corresponding advertising costs can be deducted.
What do I need to know about rental income?
What is the business identification number (W-IdNr.)?
The W-IdNr. is a unique identifier assigned to all companies and self-employed individuals operating economically in Germany. It consists of "DE" and nine digits. Unlike the VAT identification number (USt-IdNr.) or the tax identification number (IdNr.) for individuals, the W-IdNr. is intended for companies and self-employed individuals of all legal forms. The aim is to simplify communication between companies and authorities.
Introduction of the W-IdNr.
From 1 November 2024, the BZSt will begin the gradual allocation. Affected companies and individuals will receive the number automatically and free of charge. The process is expected to be completed by 2026.
Function of the W-IdNr. compared to existing numbers
The tax number will remain valid on tax forms even after the introduction of the W-IdNr. The tax identification number (IdNr.) for individuals according to § 139a Fiscal Code (AO) will also remain. Unlike the USt-IdNr., the W-IdNr. does not need to be applied for.
Regulations for the W-IdNr.
The exact regulations for the introduction and allocation of the W-IdNr. are set out in the Business Identification Number Ordinance. This governs the timing of the introduction, the allocation practice, and the deletion of numbers. The W-IdNr. serves as a central identification feature in communication with tax offices and other authorities.
Information from the BZSt
The Federal Central Tax Office provides comprehensive information and FAQs on the W-IdNr. on its website, including the following questions:
- Who receives a W-IdNr.?
- Is more than one W-IdNr. issued for multiple businesses?
- Difference from the USt-IdNr.?
- What to do if master data changes?
More information can be found at www.bzst.de in the section Companies > Identification numbers > Business Identification Number.
Conclusion: The introduction of the W-IdNr. from November 2024 is a step towards modernising the German tax system. It aims to simplify communication between companies and authorities. Allocation is automatic and free of charge.
What is the business identification number (W-IdNr.)?
