Rental income

A government bill passed, to offer tax credits to landlords as an incentive to lower rents to help tenants who find themselves in financial difficulty due to lockdown against COVID-19.

A tax credit equal to 50% of the rent reduction will be available when the landlord reduces the rent for a period of up to three months by 2020. To become eligible for the tax credit, the monthly rent reduction should be between 30% and 50%.

Furthermore:

1. the tax credit will be granted for a reduction of rents relating to a period not exceeding three (3) months which falls within the tax period 2020 regardless of the agreed months for which the reduction will apply
2. a written agreement between the owner and the tenant for the rent reduction should be made
3. the credit will not be granted in the case that the owner and the tenant are connected persons as defined in Article 33ˑ
4. the tax credit may be used against the total tax resulting for the tax year 2020.
5. any refundable tax resulting from this credit, cannot exceed the amount of tax paid.

Example

If a tenant pays €1,000 in rent per month, and the landlord reduces it by half, then, for the three months (e.g. for June, July and August), the tenant will pay €1,500 instead of €3,000 for these three months.

The landlord will be eligible for a tax credit of €750, which is half of the rent reduction.