Tax on rental property: step by step

Chapters of the article

• Rent tax and the law
• Tax on rental property as a natural person
• You can apply a 30% flat rate to tax on renting a flat
• You do not have to pay social security and health insurance
• Renting an apartment and taxes: who is exempt?
• Rent and EET
• What about tax on rental property?
• Property rental and VAT
• VAT on rent from 2021
• A few sentences in conclusion

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.

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.

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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.

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.