Renting Properties Over 250 Square Meters: The Challenge of Income Generation Intent
Renting out properties is a common form of income generation. However, what happens when dealing with particularly large residential spaces? In such cases, the assumption of income generation intentis not automatically granted. This article sheds light on the challenges and requirements associated with renting out apartments exceeding 250 square meters
Tax Requirements forRenting Out Large-Scale Properties
In accordance with current tax law, the taxpayer must demonstrate that the rental activity is conducted with the intention of making a financial profit. This proof is particularly crucial when dealing with large-scale apartments. Should losses result from the rental activity over anextended period and the proof of income generation intent cannot be provided,the rental activity is considered as non-relevant hobbyism for tax purposes.
The Federal Fiscal Court (BFH) has confirmed this legal opinion and emphasized that in the case of elaborately designed or equipped properties, a taxable activity cannot be automatically assumed. This is because the market rent often does not adequately reflect the special residential value, and the associated costs are often not covered. Therefore,it is necessary to demonstrate that a positive result can be achieved over a period of 30 years to justify the tax assessment of income.
Conclusion:
Renting out large-scale apartments presents a particular challenge when it comes to establishing income generation intent. Taxpayers should be aware of the requirements and take appropriate measures to demonstrate that the rental activity is based on a long-term and profitable basis. Compliance with applicable tax regulations is crucial to avoid undesirable tax consequences.