If you rent out your property, you will receive property income.
You will be taxed differently depending on whether you are renting the property to someone who uses it for private (residential) purposes or for business purposes.
What difference does this make to you and how do you compare the two possibilities?
First, let’s look at the more common case of renting to an individual.
Let’s assume a property with a cadastral income of 1,529 euros.
The owner’s property income will be equal to the indexed cadastral income multiplied by 1.4.
Let 1,529 x 1.8491 (coefficient 2020) x 1.4 = 3,958 euros.
This income is added to the owner’s taxable base and therefore represents a maximum tax of 1,979 euros (excluding municipal add-ons) regardless of the amount of the rent.
Let’s now take the case of renting to a professional
In this case, the amount of rent will have an impact on taxation.
Let us assume again a RC of 1529 euros and a rent of 1,000 euros per month.
The owner’s property income will be equal to the income generated, i.e. 12,000 euros less 40% of costs, i.e. 4,800 euros but limited to 1529 x 2/3 x 4.57 (revaluation coefficient for the year 2020) = 4,658.
The property income is therefore equal to 12,000 – 4,658 = 7,342 euros.
This income is added to the owner’s tax base and therefore represents a maximum tax of 3,671 euros (excluding municipal additions).
Given the tax surplus generated by renting to a professional, 3,671-1,979 = 1692 euros, the owner could have an advantage in renting to a private individual if the rent is at least 859 euros.