Taxes on income from renting out real estate

One of the current priorities of the State Revenue Service (SRS / VID) is the legalisation of income from renting or leasing real estate.

SRS officials carry out regular control measures and collect information from advertisement portals, social networks, and state information systems to identify potential non-payers and take preventive actions to mitigate risks. Increasingly, residents receive SRS letters encouraging them to declare such income in a timely manner.

Choosing the right tax regime

A natural person who plans to rent out or lease real estate can choose the most suitable tax regime. Each form of activity has its own conditions, strengths, and weaknesses — therefore, before making a decision, it is advisable to:

• consult specialists,
• analyse your specific situation,
• perform preliminary calculations.

Available activity options

• establish a limited liability company — SIA;
• register an individual enterprise (IU) or obtain sole trader status (IK);
• register economic activity and pay taxes under the general procedure;
• pay Microenterprise Tax (MET / MUN);
• use the notified economic activity model.

SIA / IU / IK: taxes and requirements

Company and individual enterprise status is registered with the Enterprise Register. Maintaining these forms generally requires specific accounting knowledge.

Income is typically subject to:

• Corporate Income Tax (CIT) at 20% (paid at the time of profit distribution),
• labour taxes — PIT and social contributions (VSAOI),
• and other taxes under the general rules.

Natural person: economic activity under the general regime

If you choose to pay tax as a natural person, you must register economic activity with the SRS and keep records of income and expenses.

In this case:

• annual income is taxed with the progressive PIT rate (depending on annual income — 25.5% or 33%),
• social contributions (VSAOI) apply quarterly — 31.07% and/or 10%.

Microenterprise Tax (MET) and the economic activity account (SDK)

An economic activity performer may choose the Microenterprise Tax:

• 25% on income up to EUR 50,000;
• 80% of this amount is allocated to VSAOI, and 20% to PIT.

Since 2023, Microenterprise Tax payers may open a so-called economic activity account (SDK), where the bank, in cooperation with the SRS, automatically calculates and transfers the tax to the state budget.

Notified economic activity

If rental income is not significant and expenses are minimal, the most suitable option may be notified economic activity.

Key steps and conditions:

• within 5 business days after signing the rental agreement, it must be registered in SRS EDS using a special registration form;
• after registration, the landlord may apply a reduced PIT rate of 10% to rental income;
• no allowances or property maintenance expenses may be deducted from taxable income, except the paid real estate tax for the specific property;
• tax is calculated and paid once per year by filing the annual income tax return for the previous tax year from 1 March to 1 June, and paying the tax by 23 June.

Renting to a legal entity

When leasing an apartment to a legal entity, the tenant is responsible for withholding tax at the time of payment and transferring it to the state budget. The landlord must ensure the lease agreement is registered in SRS EDS.

Important:

• the taxpayer should ensure that up-to-date information on changes and updates to the lease agreement is submitted in SRS EDS;
• there are precedents where, due to incorrect contract information, the SRS may apply the standard 20% rate.

Note / Contacts

This article is for informational purposes. For tax legislation application in a specific case, we recommend contacting our tax consultants:

• Phone: 67442838
• Phone: 26110067