Tax Administration: No New Tax for Renters

After some media outlets reported that a new tax is being introduced for renters, the Tax Administration issued a statement to refute such claims, and we are transmitting their response in full.

– The claims made by media articles announcing the introduction of a ‘new’ tax for renters are incorrect, and for the purpose of truthful information to the public, the following statement is provided:

With the current amendments to the Law on Local Taxes (hereinafter: LPT), no new tax is being introduced, nor is the method of its application being expanded or changed.

According to the provisions of the LPT, the tax on holiday homes is an optional tax, which means that local government units decide by their Decision whether to introduce a tax on holiday homes. In addition to making a decision on the introduction of the tax on holiday homes, local government units are authorized to prescribe the amount of the tax, within the limits set by the LPT, depending on the location, age, state of infrastructure, and other circumstances important for the use of the holiday home, as well as the competent tax authority for determining and collecting the tax.

With these amendments to the LPT, at the request of certain local government units, the upper limit for prescribing the amount of this tax is increased, and the provisions for determining the status of a holiday home are clarified in cases where the property in question is used for rental in tourism.

Namely, for determining the obligation of the tax on holiday homes, as one form of property tax, it is essential to establish whether it concerns a building or part of a building or an apartment that is used occasionally or seasonally, or it is essential to establish that the property in question is not intended for permanent use (for the residence of the owner or another person or for another permanent purpose of use). Renting apartments, rooms, and beds to travelers and tourists, which is provided under a special regulation, is an activity carried out by a natural person, and based on the activity for the income generated from the activity, there is an obligation to pay income tax according to the provisions of the Income Tax Act. If the activity of renting apartments, rooms, and beds to travelers and tourists is provided only for part of the calendar year, it is evident that such property is used occasionally or seasonally, and regardless of the activity being carried out in the property in question, it is subject to the obligation to pay the tax on holiday homes.

The tax on holiday homes and the income tax paid by renters are tax forms that are determined independently of each other, as they are taxes determined on different bases. The tax on holiday homes is determined based on ownership and the manner of use of a specific property, while the income tax is determined based on the performance of the activity according to the income generated or by another criterion.

This interpretation of these tax forms arises from the fundamental principles of taxation based on three pillars (labor, property, and consumption) that have been implemented in the legal provisions on the obligation to pay these taxes. The Tax Administration interprets and applies these legal provisions unchanged since the introduction of these tax forms, which is clearly visible from the opinions on inquiries from taxpayers published on the Tax Administration’s website.