When is accommodation provided at a reduced rate?
If you have income from properties rented to relatives, these are subject to special income tax scrutiny. The tax office particularly checks whether the property was rented at a reduced rate. There is an important change from 1 January 2021:
- If the agreed rent is at least 66% of the local market rent, the expenses are fully deductible as advertising costs.
- If the agreed rent is between 50% and 66% of the market rent, the intention to generate income must be checked, and a profit forecast is required:
- If the profit forecast is positive, the advertising costs are fully deductible.
- If the profit forecast is negative, the advertising costs must be apportioned and are only partially deductible.
- If the agreed rent is less than 50% of the local market rent, the use must be divided into a paid and an unpaid part. The expenses are only deductible as advertising costs in proportion to the paid part.
Important: If the rent is at least 50 percent but less than 66 percent of the local rent, a total surplus forecast check must be carried out:
If this total surplus forecast check is positive, the intention to generate income is assumed for the provision of reduced-rate housing, and the full deduction of advertising costs is possible. If the total surplus forecast check is negative, the intention to generate income is only assumed for the paid part. Advertising costs can be partially deducted for the paid part.
The total surplus forecast check for income from renting and leasing is carried out according to long-standing and established BFH case law. The BMF letter of 8 October 2004 (BStBl 2004 I p. 933) remains applicable.
When renting furnished or partly furnished flats, it may be necessary to include a surcharge for the furnishings to determine the local market rent. Such a furnishings surcharge must be considered according to the Federal Fiscal Court ruling of 6 February 2018 (IX R 14/17) if it can be determined from a local rent index or surcharges achievable on the market. Determination in any other way is not possible. In particular, it is not permissible to derive a furnishings surcharge from the monthly amount of the linear depreciation for the furniture and furnishings provided. Nor is it permissible to apply a percentage rental yield surcharge.
The 50% and 66% thresholds apply only to the rental of flats, not to commercially or freelance used premises.
