Income and expenses related to the letting of an apartment can only be recognised for tax purposes if the letting activity is intended to be long-term and there is an intention to generate sustained surpluses.
In the case of a holiday apartment, such an intention to generate income is generally assumed if the apartment is let exclusively to changing holiday guests throughout the year and is kept available for letting during the remaining time. This may be the case, for example, if the letting has been transferred to an agency or an intermediary (such as a local tourist board) and personal use is contractually excluded for the entire year, or if the landlord has another apartment in close proximity to the holiday apartment, so that personal use of the holiday apartment in question can regularly be ruled out.
It should be noted, however, that the intention to generate income may be subject to particular scrutiny if losses are incurred from the letting of the holiday apartment.
A loss from the letting of a holiday apartment is recognised for tax purposes, among other things, if the actual letting period of the holiday apartment falls short of the customary local letting period for holiday apartments by no more than 25%. In its ruling of 26 May 2020 (IX R 33/19), the BFH held that, when reviewing this question, official comparative data may also be relied upon that are not generally published but are made available only upon request. Occupancy rates may also be taken into account where appropriate.
Background: Letting of real estate frequently results in losses. However, provided that the letting activity is intended to be long-term, the case law presumes an intention to generate a surplus and generally recognises the losses.
In the case of a letting that is not intended to be long-term, the taxpayer must, on the basis of a forecast covering a period of 30 years, demonstrate that a so-called total surplus will be achieved.
According to the view of the tax authorities, the preparation of a surplus forecast for the letting of a holiday apartment to changing guests is not required if one of the following points is credibly demonstrated:
- The landlord has transferred the decision regarding the letting to an intermediary and has contractually excluded personal use.
- The holiday apartment is located in a two-family or multi-family house otherwise used by the owner, or in the immediate vicinity thereof.
- The landlord has more than one holiday apartment in the same location and uses only one of these holiday apartments for personal residential purposes.
- The actual letting period does not fall significantly short of the customary local letting period (i.e. by 25%).
Frequently asked questions
Frequently asked questions
When is an intent to generate income assumed in the case of a holiday apartment?
An intent to generate income is generally assumed when the holiday apartment is rented out or made available exclusively to changing holiday guests throughout the year and personal use is ruled out. This applies, for example, when the rental is delegated to an agency or tourist board and personal use is contractually excluded for the entire year. Additionally, if the landlord owns another apartment in the immediate vicinity, this further supports the absence of personal use.
When is a loss from renting out a holiday apartment recognised for tax purposes?
A loss is recognised, among other conditions, if the actual rental period falls short of the locally customary rental period for holiday apartments by no more than 25%. If this threshold is exceeded, the tax office examines the intention to generate income separately and typically requires a 30-year surplus forecast.
Which comparative data may be used to verify the customary local rental period?
According to the BFH ruling of 26.05.2020 (IX R 33/19), official comparative data may also be used even if they are not publicly published but only made available upon request. In addition, occupancy rates can serve as a comparative benchmark.
In which cases is a profit forecast for a holiday rental not required?
According to the tax authorities, a profit forecast is not required if one of the following is credibly demonstrated: the rental is transferred to an agent with a contractual exclusion of personal use; the apartment is located in an otherwise owner-occupied two- or multi-family house or in immediate proximity; several holiday rentals exist at the same location with only one used personally; or the rental period does not fall short of the locally customary period by more than 25%.
What applies for tax purposes in the case of a rental arrangement not intended to be permanent?
If a rental arrangement is not intended to be permanent, the taxpayer must prepare a forecast covering a 30-year period and demonstrate that an overall surplus will be generated. If this proof cannot be provided, losses will not be recognized for tax purposes.