Your landlord does not like teleworking
November 2021 – When a lessee uses the rented building for business purposes, the lessor is taxed on the rental income, not on the cadastral income, which is usually lower. In these times of the coronavirus crisis, we have learned to work from home en masse and many would like to continue to do so as well. But what about the lessor?
The lessor is a natural person
If, as a natural person, you rent a building to another natural person who does not use the property for business purposes, you are taxable on the indexed cadastral income plus 40%.
If you rent a building to a company, a non-profit organisation or an individual who uses it, even partially, for professional purposes, you are taxable on the net rent. The net rent is calculated by deducting 40% from the rent and any rental benefits you receive.
In addition, you must add a small calculation: the flat-rate expense deduction of 40% may not exceed two thirds of the revalued cadastral income.
Example 1
Let's take a concrete example.
You have a building with a cadastral income of 1 200 euros.
You charge a monthly rent of 700 euros. That is: 8 400 euros on an annual basis.
The indexation coefficient of the property income is 1,8630.
The revaluation coefficient of the cadastral income is 4,63.
1 200 euros x 1,8630 + 40% = 3 129,84 euros.
If you rent to a private individual, your taxable income is
1 200 euros x 1,8630 + 40% = 3 129,84 euros.
If you rent to a company or a person who uses the property for business purposes, your taxable income is
8,400 euros - the flat-rate costs :
40% of 8 400 (= 3 360 euros), i.e. 5 040 euros;
or: 4,63 x 1200 x 2/3 (= 3 704 euros), i.e. 4 696 euros;
the taxable income is therefore (8 400 euros - 3 360 euros): 5 040 euros.
If, for example, you charged 800 euros in rent per month, 40% of 9,600 euros (= 3,840 euros) would be greater than 4.63 x 1,200 x 2/3 (= 3,704 euros) and the standard deduction would be limited to the latter amount. The taxable income would then be EUR 5 896.
The lessee and business use
You will see: you will really want to know whether your lessee will use the building for professional purposes. And the taxman takes this line of reasoning very far: if your lessee is an Ostend resident who rents a small flat in Hasselt to be closer to his work, this lessee can argue that he is renting the property for professional purposes. His advantage: the rent becomes a deductible business expense.
If the tax authorities accept this, you as the lessor will pay the price!
It is also possible that your lessee may be able to "re-invoice" his rental charges to his employer, because the employer requires the lessee to live within a certain radius of his place of work. In this case, the lessee does not deduct the rental charge, but the employer does. And it is the lessor who will once again pay a much higher tax bill.
Only for the actual rent
There is, however, some reassuring news: the rule that business use leads to taxation on the gross rent only applies to the situation where the rent itself has been recorded as a business expense. If, for example, your lessee is reimbursed for his or her Internet connection or if he or she benefits from an intervention in certain maintenance work, you will not suddenly have to pay much more tax as lessor.
Teleworking corona
At the beginning of 2021, the tax authorities made a lot of taxpayers happy with a general circular on teleworking allowances: since February, employers can pay their employees an exempt flat-rate office allowance of 129,48 euros per month (and even 144,31 euros until September 2021).
If you read the circular carefully, you will see that this allowance must cover all kinds of costs, including the costs of "the use of office space in the employee's home (including the rental and possible depreciation of the space)".
In other words: the employer pays his staff a sum of money, among other things to pay the rent, and then deducts it. Does this not result in a professional use of the building? The question was put to the Minister of Finance in Parliament.
First of all, he confirmed that the net rent becomes taxable in principle when the employer pays the employee rent and then deducts it.
But he is prepared to make an exception for exempt office allowances. There is no doubt that the lessee uses the building for business purposes, but as long as he does not declare his actual expenses and deduct the rent from his taxable income, the lessor will not be taxed on the net rent.
