Rental tax — lump sum and the rules

The lump sum as a form of settling rental

Private rental, that is renting out property not connected with running a business, is currently settled with a lump sum on recorded revenue. This is a significant change in approach — you calculate the tax on the revenue achieved, not on income, so as a rule you do not deduct the costs of earning revenue from the base.

Such a construction has its pluses and minuses. The advantage is simplicity: you do not have to keep detailed records of costs or account for depreciation. The disadvantage is the inability to reduce the base by expenses related to the property, for example renovations or furnishings. For many landlords, however, the lump sum remains a convenient and transparent solution.

Two lump-sum rates

The lump sum on private rental provides for two tax rates depending on the amount of annual revenue. Up to a specified threshold a lower rate applies, and on the excess above that threshold — a higher rate. This means that the greater your rental revenue over the year, the more of it is taxed at the higher rate.

This mechanism operates progressively only in relation to the excess: exceeding the threshold does not cause all the revenue to be taxed at the higher rate, but only the part that crosses the boundary. Since the specific values of the threshold and rates may change in successive years, before settling it is worth confirming the current figures with a tax adviser or the tax office.

What constitutes the tax base

The base for the lump-sum tax is the revenue, that is the rent actually received. The key distinction here is between the rent due to you as the landlord and the operating charges. If the tenant covers utilities or the administrative service charge, and you merely pass these amounts on to the suppliers, they usually do not constitute your revenue for taxation.

The way these charges are treated depends, however, on the wording of the rental contract. To avoid doubt, it is worth clearly separating in the contract the rent, which is your revenue, from the operating charges passed on to the tenant. A precise contract makes it easier to correctly establish the tax base and protects you in the event of an inspection.

Deadlines and method of settlement

You settle the lump sum on rental with the tax office yourself — here there is no remitter to do it for you. During the year you calculate and pay advances on the tax on the revenue earned, within the deadlines provided by the regulations. After the end of the tax year you file an annual return on the PIT-28 form.

It is important to keep track of the deadlines, because arrears may involve interest and consequences from the tax office. A good habit is to set aside the amount of tax due on an ongoing basis, from each rent received, so that there is no shortage of funds at settlement. If you are unsure about the deadlines, confirm them with the office or an adviser.

What to remember when renting out

Settling rental is not only the tax itself, but also a range of good practices that make life easier. The basis is a solid, written rental contract clearly setting out the amount of the rent and the rules for settling utilities. It is also worth documenting the payments received, for example accepting rent by bank transfer, which makes it easier to demonstrate revenue.

Remember too that the rules for taxing rental are sometimes amended, and your situation may require individual analysis — occasional rental of one flat looks different from renting on a larger scale, which may be regarded as business activity. In case of doubt, consult a tax adviser to choose the correct form of settlement.

Summary: a reliable rental settlement

You settle private rental with a lump sum on revenue, calculating the tax on the rent received without deducting costs. Two rates apply — a lower one up to a specified annual revenue threshold and a higher one on the excess. The base is the actual rent, not the operating charges passed on to suppliers. You settle the lump sum yourself, paying advances and filing PIT-28. Confirm the current thresholds and rates with the tax office or an adviser.