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Tax on rental property: step by step

Whether you are renting a house, a flat in so-called personal ownership or even a cooperative flat, commercial space or land, rental income is of course not taxed. However, if you are not experienced in filling in the annual tax return or if you are concerned with the taxation of rent for the first time, the following few lines will enlighten you on how to declare the tax on rent correctly in our country. You will then be able to handle the income tax on rental property without much effort.

Daň z pronájmu nemovitosti: Krok za krokem
6 minutes of reading

Chapters of the article

Rent tax and the law

Renting an apartment and taxes – this is one big topic. Before we even get to the most important question, i.e. how much tax you pay on rental property, it is necessary to distinguish whether you are renting as an individual or whether you have a property registered as a commercial property. And because the income you receive from letting is like any other taxable income, it is subject to 15% tax for individuals and 19% tax for corporations.

Tax on rental property as an individual

If the money you earn from renting out your home, even a condominium, is your only income, you can quickly calculate how much the 15% tax will cost you. That is, after deducting expenses. However, the vast majority of people have other incomes. So let’s describe a situation where you have rental income as an income in addition to your main economic activity. If you are an employee, self-employed, in receipt of a pension or even a combination of these, you simply include the rental income in your tax return along with your other taxable income.

Rental property

We will make sure that the rental of your apartment or other property is carried out without legal complications. We will draw up or check the lease agreement and advise on how to terminate or extend the lease.We will handle everything quickly and flawlessly. You can only pay after the service has been provided.

Tip: Read also our comprehensive guide: ‘All about renting

You can apply a 30% flat rate to your tax on renting a flat

As with business income, for example, you can use the flat rate of 30% for real estate to determine the partial tax base, or you can apply actual expenses. It’s up to you. If you know that it costs you a lot of money and time to look after the property each year and you actually keep a record of the costs, then it is quite likely that you would be wasting money by claiming the flat rate and it would cost you a lot of tax on your rental property.

You can include a lot in your expenses – for example, depreciation of the property, any maintenance and repair costs, property insurance, furnishing costs, mortgage interest, estate agent fees or even transport costs.

You don’t have to pay social security or health insurance

However, there is one difference compared to the aforementioned business income. You do not report the income from renting out the property to the health insurance company or the social security administration, as it is not subject to health or social insurance. That is, only if someone else pays it for you – your employer, or the state if you are, for example, a student, a pensioner, on maternity leave or self-employed.

Renting an apartment and taxes: who is exempt?

Let’s take a look at rental property and taxes, or who is exempt from them. As with most taxes in the Czech Republic, rental tax is exempt. If you are an employee and your income from renting an apartment does not exceed CZK 20,000 per year, you do not pay the tax. You have to pay the tax if you earn more than CZK 20,000 a year as a self-employed person or an employee.

Tip: Don’t you want to deal with property taxes anymore?! Maybe it’s time to gift a property to a loved one. A gift deed is a quick and easy solution.

Příjmy z nájmu se nevyhnou zdanění - jak na to?
Příjmy z nájmu se nevyhnou zdanění - jak na to?

Provision of accommodation services

If renting is your business, then you are not essentially providing a rental service, but an accommodation service. This is especially true for those of you who offer your apartment or flats on accommodation services like Airbnb or Booking. In this case, even according to court case law, it cannot be a rental.

Unlike the previous case, social security and health insurance are paid on this income. Again, you can apply the actual expenses or a flat rate, which this time is 60%.

What about tax on ground rent?

You may be thinking that a house or flat is not the only thing you can rent out. Maybe you own commercial premises or land that you don’t want to leave fallow, so you rent it out. Of course, you also have to include income from land rental in your tax return. Land rental tax is governed by the same rules, again the crucial factor is whether you have these properties listed as business property or are offering them as an individual.

Property rental and VAT

In the area of VAT and real estate, the law was amended as of 1 January 2021. In general, the rental of immovable property is exempt from tax. At the same time, however, the law provides for several exceptions. These include, for example, short-term rental of real estate, the provision of accommodation services or the rental of premises for parking vehicles.

Tip: Find out what to look out for when renting without a real estate agent.

A few sentences in conclusion

You can, of course, rent out more than one property, but you always tax them all in the same way on your tax return. This means that you can’t, for example, claim a flat rate on one flat and actual expenses on the others.

If you’ve already read this far, it’s clear that no rental property tax calculator, if there is one, will give you a concrete answer as to how much tax you’ll pay. In short, you need to include the rental income in your total income, and after deducting your expenses, you will find out how much you will pay in total income tax.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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