Following a new decision of Finance on property and VAT, residential landlords would be wise to check (or have checked) whether the fee for service charges should be subject to VAT.
Residential rentals are exempt from VAT. It is not possible to opt for VAT-taxed rentals. Performances made by the landlord in addition to the letting can run with the letting for VAT purposes. But they can also be taxed with VAT as a separate performance.
Approval
In the old decision (from 2013) contains the following sentence: “Service charges charged to residential tenants usually relate to operations/facilities that merge into the rental service.”. Under this approval, service charges for residential properties are treated as part of VAT-exempt rent in many cases.
The new decree no longer contains this sentence/approval. Landlords of residential properties must assess whether service charges, separate from VAT-exempt rent, should be taxed with VAT. This is the case if the tenant(s) is (are) free to choose the supplier and/or to determine the level of consumption of the facility. An important indication for this is an individual meter and billing based on actual consumption.
The new decree stipulates that landlords may apply the approval from the old decree until 1 January 2025.