Property Taxes: VAT and Holiday Accommodation – European Union

Factfile

A letting of holiday in the European Union member states is likely to be subject to VAT. In the UK the registration threshold is Ł61,000 and some member states also have a registration threshold. Many countries registration thresholds are lower than the UK’s so the burden of VAT can eat into the rental income and cause additional administration. Listed below are some of the EU countries. VAT levels are different depending on the member states – e.g. Spain is 16 per cent and Sweden is 25 per cent. Many countries have “tax treaties” with other countries. Always consider consulting an accountant in the country the property is located in and also your own home country.

EU Member states – Austria, Belgium, Czech Republic, Cyprus ,Denmark Estonia, Finland, France ,Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, United Kingdom.

Belgium: Holiday rental income is subject to VAT at 21 per cent.

Czech Republic: Holiday rental income is subject to VAT at 19 per cent

Denmark: Holiday rental income is subject to VAT at 25 per cent.

France: Holiday rental income is subject to VAT (TVA) at 19.6 per cent. For furnished lettings up to an annual value of €76,000 there is a 72 per cent rate deduction in respect of expenses under the ‘Micro-Bic’ regime. The remaining 25% net profit is taxed at 25%. If the investor has assets with a value in excess of €720,000 the owner will be subject to an annual wealth tax of between 0.55 per cent and 1.8 per cent. If you dispose of your property after less than two years you will be subject to income tax at 16 per cent and after that up to 47 per cent.

Hungary: Holiday rental income is subject to VAT at 20 per cent

Ireland: Holiday rental income is subject to VAT at 21 per cent. For other rentals the Income tax rates can be as high as 42 per cent with other charges of up to 5 per cent applicable.

Italy: Holiday rental income is subject to VAT at 20 per cent. With residential rental income the income tax is charged at the same rate as other income. The first €100,000 of Italian income is taxed at 23 per cent with an excess being taxed at 33 per cent. Expenses like mortgage interest are tax deductible. If a property is not let out the tax charged is at a notional rate. This would normally be around 1 per cent of the property’s value per year. If the property is sold within five years of ownership the tax rate will be 23 per cent and if it is owned for more than five years then there will be no tax. In Italy there is no inheritance tax, however the beneficiary of the inheritance will have to pay a registration and transfer tax.

Poland: Holiday rental income is subject to VAT at 22 per cent

Portugal: Holiday rental income is subject to VAT at 21 per cent. For rental properties the owner is charged a flat rate of 25 per cent on gross rents and there is no allowances for expenses like mortgage interest. The capital gains tax is 25 per cent and a 10 per cent transfer tax applies to property inherited by a close relative or an unmarried partner.

Slovenia: Holiday rental income is subject to VAT at 20 per cent

Spain: Holiday rental income is subject to VAT at 16 per cent. Rental income is subject to 25 per cent tax on gross rental and you cannot have deductions for mortgage interest and other expenses. Spanish property that is owned by non residents is subject to an income tax "Impuesto de la renta" and a wealth tax -"Patrrimonio". This is arranged on a sliding scale climbing to 2.5% on properties over €10.7m. The base rate for the tax "Impuesto de la renta" — income tax is 1.1% of the cadastral value of the property. This determined by the size and location. Inheritance tax rate varies from 7.65 per cent to 81.6 per cent.

Sweden: Holiday rental income is subject to VAT at 25 per cent

United Kingdom: Holiday rental income is subject to VAT at 17.5 per cent

The above information is given in good faith by jml Property Services and the website it is being displayed on. It should not be relied on for accuracy and property owners should consult tax experts / accountants in the country their property is in and also their home country ©jml property Services 06-06

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