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.
Renting an apartment and taxes – this is one big topic. Before we even get to the most important question, i.e. how much you pay in tax on renting a 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 21% tax for corporations.
If the money you earn from renting out your home, even from renting out a cooperative flat, 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.
We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
As with, for example, business income, you can use a flat rate of 30% for real estate or you can use actual expenses to determine your partial tax base. 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 the tax on renting the property would cost you dearly.
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.
Read also our comprehensive guide: ‘All about renting‘
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.
Let’s take a look at who is exempt from tax on renting an apartment. As with most taxes in the Czech Republic, there is an exemption from paying tax on rent:
Read about when the landlord can increase the rent and the inflation clause
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, in this 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%.
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.
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.
Find out what to look out for when renting an apartment from a tenant’s perspective.
Of course, you can 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 have already read this far, it is clear that no flat rental tax calculator , if there is one, will give you a concrete answer as to how much tax you will pay. In short, you need to include the rental income in your total income, and after subtracting your expenses, you’ll figure out how much you’ll pay in total income tax.
Income from renting out property is taxed in the same way as other income – individuals pay tax at 15%, corporations at 21%. Rental income is included in the tax return together with other income, even if it is only incidental income. Expenses can be claimed either as a flat rate (30%) or as actual expenses (e.g. repairs, insurance), and the method chosen must be the same for all properties.
Rental income is not subject to health or social security unless it is a business (e.g. Airbnb accommodation) where you already have to pay tax. In this case, the 60% flat rate may also apply.
You are exempt from tax if you have no other income and do not earn more than CZK 50,000 per year from renting. For employees or self-employed persons, the limit is CZK 20,000. The tax also applies to the rental of land or commercial premises.
Rentals are generally exempt from VAT, with the exception of short-term rentals, accommodation and car park rentals. The amount of tax depends on many factors, so it is worth consulting a professional.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
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.
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