Perhaps you’ve landed on this post because you’ve just acquired a property that you’re looking to rent out, and don’t know where to begin. Or perhaps you’re no stranger to the rental market, but you want to be absolutely sure that you’re getting the best deal on your rental tax each year.

Whatever the reason, we’ve got good news for you: it’s very likely that you can actually pay less on rental tax than expected. Why? The current withholding tax on rent gives you flexible options that can help you save on tax. Don’t worry it’s not as complicated as you might think it is – we’re here to talk you through it.

Short Lets

The leasing of a property on a short-term basis is deemed to be a trading activity. Under these circumstances, an individual or business is required to register for VAT purposes. The VAT treatment that is to be applied shall depend on whether the yearly income exceeds the stipulated threshold for small businesses. Where such threshold is exceeded, VAT is to be charged on the outward rental supply, whereas VAT incurred on business expenses can be recovered. On the other hand, where the threshold is not exceeded, no VAT is charged on rental income and VAT on incoming expenses is not recoverable.

A tax analysis is to be carried out in order to determine which of the following options to declaring and paying tax on your income is most beneficial:

  • Tax your personal profit at the applicable tax rate or at the standard corporate tax rate of 35% in case of a company. It is essential that a thorough exercise is carried out in order to determine your profit after deducting allowable business expenses;
  • Tax the gross rental income at the flat rate of 15% via a TA 24 form.

Long Lets

An individual or a company receiving rental income from property leased out on a long-term basis, whether for residential or commercial purposes, shall follow a simpler approach. This is because such income is considered to be passive in nature and to that end registering for VAT is not required.

The tax options to be considered here are:

  • Tax your personal profit at the applicable personal tax rate or at the standard corporate tax rate of 35% in the case of a company. It is to be noted that under this option, only the following expenses can be deducted:
    1. Loan interest paid on financing used to acquire the property;
    2. Value of any ground rents paid;
    3. Licences paid to the MTA ;
    4. 20% maintenance allowance;
  • Tax the gross rental income at the flat rate of 15% via a TA 24 form.

It is worthy to note that under the TA 24 tax regime, you can benefit from a varying tax rebate on any rental income earned from private residential leases entered into as from 1st January 2020 onwards. The eligibility for such tax rebate is subject to such leases being registered with the Housing Authority as a long private residential lease.

How can we help?

Keeping the above in mind, our aim is to help you outweigh your options and benefiting from the most tax efficient system applicable to you. Following our tax analysis, we shall assist you with the necessary submissions, being either a TA 24 form availing of the 15% flat rate or the annual income tax return.

Be mindful that taking action will work out in your favour. In the event of non-compliance, penalties and interest would be levied onto your business. That’s no good, but we are here to help you ensure that your business is tax compliant. Get in touch with us now!

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