Cheap transfer of a dwelling
of an apartment to relatives such as children, parents or siblings, care must be taken to ensure that the rental agreement corresponds to what is customary between strangers and that the agreement is actually executed in this way (e.g. through regular rent payments and utility bills).
If this is not the case, the rental relationship as a whole will not be recognized, in particular with the consequence that income-related expenses associated with the rental cannot be claimed at all.
Another special feature
must be taken into account if the rental is at a discount: If the agreed rent is less than 66% of the local market rent, the tax office assumes that the rental is partially paid and reduces the income-related expenses (pro rata).
The local market rent comprises the local cold rent plus the costs apportionable in accordance with the Operating Costs Ordinance (so-called warm rent).
If, on the other hand, a rent of at least 66% of the customary local rent has been agreed, the income-related expenses deduction is retained in full (Section 21 (2) EStG).
This regulation applies accordingly when renting an apartment to strangers. The reason for the discounted transfer does not matter. The tax authorities also make a (pro rata) reduction of the income-related expenses if it is not possible to increase the agreed rent for legal or factual reasons in order to comply with the above-mentioned limit.
It is recommended to regularly review affected leases and adjust the rent if necessary.
(For more notes, information, and examples, see our Information Letter 12/2018).
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Neumann & Walczak – tax consulting company GmbH – Robert-Bosch-Strasse 1 – 59439 Holzwickede
Neumann & Walczak Tax Consultants – Partnership –
Robert-Bosch-Strasse 1 – 59439 Holzwickede
Website: www.neumann-walczak.de – E-mail: email@example.com
Phone: (0049) 02301 – 91 291 0 – Fax: (0049) 02301 – 91 291 21