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How to account for short-term rental income in 2023?
The start of the year brings with it important changes concerning renting. Firstly, private renters will only be able to account for one form of taxation, which is a flat rate. Secondly, a total ban on depreciation of premises and residential buildings applies to all.
Private rental
This year's biggest tax changes will affect private individuals who allocate their properties for rental. They will not be able to settle according to the tax scale and the only form of taxation will be a flat rate. In this settlement model, there is unfortunately no tax-free amount to be paid on every zloty earned. On top of this, there is a complete ban on depreciation. Private landlords, who have so far settled according to the tax scale, will lose costs, which may mean an increase in fees.
There is, however, the option to avoid paying tax for a while. Those who will now have to change to a flat-rate form of taxation will be able to deduct the loss from previous years when they settled according to the scale. The loss was often related to the high rate of depreciation applied, following a comprehensive renovation or investment in expensive equipment. This possibility is referred to in Article 11(1) of the Law on the flat rate. It states that a taxpayer earning rental income may deduct from it the loss referred to in Article 9(3-3b) of the PIT Act. What is more, it can be deducted when calculating monthly or quarterly tax and there is no need to wait for the annual settlement. This allows you to avoid paying tax for some time.
Business activity
Entrepreneurs for whom operating a rental business is a form of commercial activity can continue to use the tax scale form of accounting. However, in this case, they also will not deduct depreciation costs, but only the costs of maintaining the premises. Furthermore, this year, business owners can choose the settlement method, for the current year as well as for the previous year. This applies to those who settled on a flat tax PIT or lump sum in 2022.
They have until 2 May to settle last year according to the scale. When making a decision, it is essential to take into account the costs of running the business, the amount of the health contribution, etc.
Rental of a facility of a sole trader to another trader
In the accommodation industry, there are often situations in which a sole proprietor rents a flat to an entrepreneur who sublets it to another individual, e.g. through short-term rentals. When the owner of a flat does not have a PKD related to property rental added in the CEIDG, doubts may arise in relation to tax settlement.
The choice of settlement depends on the type of source of income. If the flat is not classified as part of a business activity, e.g. it has never been entered in the fixed assets register, tax must be settled under private rental. As of this year, the only form allowed is the lump sum. When the annual rental income does not exceed PLN 100 000, the rate is 8.5%. Above this amount rises to 12.5%. On the other hand, persons involved in the leasing of flats as part of their business activity still have the option to choose the form of taxation of the income obtained on this account: according to the tax scale, a flat tax or a lump sum.
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