Property Tax: What to Report in Company Assets and Who is Exempt

Property owners of residential properties who meet the conditions for exemption from the Local Tax Act or who have an obligation to pay this tax are required to report these facts to the competent authority by March 31, 2025, if it cannot determine the tax status of the residential property . The obligation to report data essential for taxation with property tax also applies to commercial companies and other legal entities that own residential properties. For this purpose, a form titled Request for Data Submission for Property Tax Reporting/Exemption has been designed for entrepreneurs, available on the Tax Administration’s website.

Entrepreneurs who qualify for exemption or report changes to the property (changes in relation to the data recorded in the land registry and other records) are required to provide data for each such residential property. The form is designed for one residential unit, so an entrepreneur with multiple properties for which they are obliged to submit data must submit a separate form for each property.

What Entrepreneurs Report

Business entities that own residential properties and rent them out for at least ten months a year based on a lease agreement do not need to submit data if the municipal fee is paid for that property. If a commercial company, institution, association, or other business entity rents a residential property to individuals who do not have registered residence or habitual residence at that property, they are obliged to inform the competent authority about the concluded lease agreement and provide proof of it.

Unlike citizens, who report the lease agreement to the tax authority for income tax purposes, legal entities record rental income in their business books, and the tax authority does not have insight into the content and duration of the lease agreement. The tax authority only has information about lease agreements concluded by citizens who are landlords and for whom a monthly income tax obligation has been established by a tax decision.

Commercial companies and other entrepreneurs are required to provide data on residential properties recorded in their business assets, which they acquired based on the set-off of receivables for delivered services, and for apartments intended for sale, provided that no more than six months have passed from the acquisition of the property and its entry into the business books until March 31, 2025. For properties acquired and entered into the business books in the described manner before October 1, 2024, exemption on this basis cannot be realized in 2025.

Properties for Sale

In the business books of entrepreneurs, residential properties intended for sale are classified similarly to commercial goods or as their own finished products, while residential properties intended for rent are recorded as long-term assets used for conducting business activities. Tax exemption is conditional on the prescribed deadline, and the entrepreneur must attach proof of the date of acquisition of the residential property along with the Request for Exemption. For apartments built in-house that are intended for sale, and where no more than six months have passed from the completion of the apartment until March 31, 2025, proof must also be attached (occupancy permit and possibly other evidence). The obligation to inform the competent authority also applies to the submission of data that affects the amount of tax, especially regarding the square footage of the residential space. If public records show one set of data, but the actual residential area of the property has increased, the commercial company is obliged to provide that information. If the property is uninhabitable, this is grounds for tax exemption, and evidence must be provided for that.

High Penalty Fines

An entrepreneur who fails to report the legal basis for exemption from property tax for a specific residential unit to the responsible authority by March 31, 2025, and is subsequently determined to have a tax obligation by a decision, is obliged to pay it within fifteen days, even if they file an appeal against the tax decision. According to the Local Tax Act, an appeal does not delay the obligation to pay tax, and if successful in the appeal process, the paid tax will be refunded. An entrepreneur who fails to report facts that affect the amount of tax obligation and thereby unlawfully reduces the tax, in addition to the evaded tax increased by default interest, is exposed to high penalty fines. The tax statute of limitations is six years, and the tax authority can, for example, determine the property tax obligation for all years back to 2025 in 2031.