Tax obligations

To tax or not to tax rental income? Each of us can answer this question in our own way. We will not convince you or moralize you, we will only summarize the general facts and give simple examples. So what does rental income entail? What obligations arise from this?

1. Registration at the tax office (Act No. 563/2009 Coll., §67, paragraphs 1, 2)

If, as a property owner, you are not yet registered with the tax office due to the performance of a business or other self-employed activity, you have the obligation to register by the end of the calendar month after the month in which you rented the property in the Slovak Republic. This also applies if you rent only part of an apartment (for example, only one room used for living), part of a non-residential space or part of a property other than land, or even if you rent an apartment that you rent yourself. If you are already registered at the tax office, you do not have to notify the rental of every other property. It is not your obligation to attach a rental agreement to the registration application, you just need to add the rental start date to the notes. After registration, the tax office will assign you a VAT number (tax identification number), which you will later provide in your tax return.

2. Records of income and expenses

The total rental income during the calendar year is considered to be the amount you actually received in that year, regardless of which period this income was related to. Any security deposit is not included in this amount. Exception is the security deposit or part of it, which you kept on the basis of the agreement in the given year.

Example of calculation of total income:

The tenant moved in with you in April, while paying you €500 per month for the current calendar month. At the beginning of the lease, he paid you a deposit of €700. Unfortunately, it was delayed in December and the payment for December did not arrive until the beginning of January. We calculate the total income as the sum of €500 within 8 months (April to November), i.e. €4,000. The deposit is not included in the total income for the given year, nor is the payment for December, since it was not credited to the account until the following calendar year.

What you will include in the total rental expenses depends on whether you decide to include your property in business property (that is, you will charge for it or it will be recorded in the records according to the Income Tax Act) or it in business you will not include the property. How you decide has an impact on the application of expenses incurred on rental income, but also later, on tax exemption in the case of income from the sale of the originally rented property.

In the event that the rented property is not included in your business property, you can claim as tax expenses only expenses for proper operation, such as energy expenses, including expenses for other services (e.g. lighting and cleaning of common areas in the house, use of the elevator, garbage removal, equipping the apartment with a common TV and radio antenna, concessionaire fees, Internet connection, etc.). However, this does not include expenses for repairs, or reconstruction of the rented property, or payment to the repair fund. Painting expenses are acceptable for hygiene purposes. Expenses for movable things that are part of the equipment of the apartment (furniture or appliances) can also be included in the total expenses, if it can be proven that they are used in the given property. It is therefore advisable to add them to the equipment of the apartment as part of the rental agreement. Expenses for built-in furniture and built-in appliances cannot be claimed in this case.

However, if the property is included in your business property, you can claim as verifiable expenses those expenses that were incurred in connection with this property, such as expenses for its acquisition (in the form of depreciation), for technical evaluation, for its repairs and maintenance or other related expenses associated with its use (such as energy expenses), expenses for real estate insurance, real estate tax, expenses related to payments to the repair fund, interest on loans and loans for the purchase of real estate. In this case, you can claim expenses for reconstruction, built-in furniture or built-in appliances.

There is no prescribed form of keeping tax records, but it must contain income and expenses in chronological order, tangible and intangible assets classified as business assets, stocks, receivables and liabilities during the entire tax period. It is necessary to be able to document them for another 5 years after the year in which the tax return was required.

Example of keeping documents for expenses:

The apartment was rented in 2018. The tax return for this period is submitted at the end of March 2019. It is necessary to be able to document the tax records for the rental in 2018 by December 31, 2024.

3. Filing a tax return

If you rent your property on the basis of a rental agreement as a natural person (non-business entity), you are not obliged to set up a business. This applies if you only offer accommodation.

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