Your landlord does not like home work

If a tenant uses the rented house or apartment for professional purposes, the landlord is taxed on the rental income and not on the cadastral income, which is usually lower. In this corona era we have learned to work from home ‘en masse’ and many would like to continue to do so. But what does the landlord think about that?

The landlord is a private individual

If you, as a natural person, rent immovable property to another natural person who does not use the property for professional purposes, you are taxable on the indexed cadastral income, increased by 40%.

However, if you rent out to a company, a non-profit organization or a natural person who does use the property for professional purposes, even partially, then tax is due on the net rent. You calculate the net rent by reducing the rent and all rental benefits you collect by 40%.
Additionally, you should add a small calculation to this: the lump sum expense deduction of 40% may not exceed 2/3 of the revalued cadastral income.

Example 1
To make it concrete.

You own a property with a KI of 1.200€.

You charge a monthly rent of 700€. In other words: 8.400€ on an annual basis.

The indexation coefficient of the real estate income is 1,8630.

The revalorisation coefficient for the KI is 4,63.

If you rent out to a private individual, the taxable income is:

1.200€ x 1,8630 + 40% = 3.129,84€.

If you rent out to a company or to someone who uses the property professionally, the taxable income amounts to:

8.400€ – the lump sum expenses:
either: 40% of 8.400 (= 3.360€), i.e. 5.040€;
or: 4,63 x 1.200 x 2/3 (= 3.704€), i.e. 4.696€.

The taxable income is therefore (8.400€ – 3.360€): 5.040€.

Example 2
For example, if you were to charge 800€ rent per month, 40% of 9.600€ (= 3.840€) would be higher than 4,63 x 1.200 x 2/3 (= 3.704€) and the lump sum deduction would be limited to the latter amount. The taxable income is then: 5.896€.

The tenant and professional use

As you will notice: you really want to know whether your tenant will use the property for professional purposes. And the tax authorities take this very far: if your tenant is an Ostend citizen who rents an apartment in Hasselt to be closer to his work, then that tenant can argue that he rents the house for professional purposes. Its advantage: the rent then becomes a deductible professional expense.
If the tax authorities accept this, you as the landlord will be presented with the tax bill!

It is also possible that your tenant may "recharge" his rent to his employer, because that employer requires the tenant to come and live within a certain perimeter of the company. In that case, the tenant does not deduct the rent, but his employer does. And again it is the landlord who is faced with a much higher tax bill.

Only for the actual rent

Some reassuring news: the rule that professional use of the rented property leads to taxation on the net rent only applies to the situation in which the rent itself is booked as a professional expense. For example, if your tenant gets his internet connection refunded or if he receives an intervention in certain maintenance work, this does not mean that you as a landlord will suddenly have to pay much more tax.

Corona home work

At the start of 2021, the tax authorities pleased taxpayers with a general circular letter about the home working allowance: since February, the employer has been allowed to pay employees a tax-free lump sum office allowance of 129,48€ per month (until September 2021, this could even be 144,31€).

If you read this circular letter carefully, you will see that this compensation must cover all kinds of costs, including the costs for "use of office space at the employee's home (including rent and any depreciation of the space)".

In other words: the employer pays out an allowance to his employees, among other things to pay the rent, and then deducts it. Doesn't this lead to a “professional use of the property”? The Minister of Finance was presented with this question in Parliament.

In first instance, he confirms that the net rent in principle becomes taxable if the employer pays the employee's rent and then deducts it.

But he does want to make an exception for the tax-free office allowances. There is no question that the tenant uses the property for professional purposes, but as long as he does not contribute his actual costs, deducting the rent from his taxable income, the landlord will not be taxed on the net rent.