Incentives for opening closed houses

The measure to exempt from income tax on rents for landlords who currently have closed homes and will open them up to put them on the market for long-term rentals is being considered for inclusion in the TIF basket. The measure would reportedly also apply to Airbnb-type short-term rental property owners who would switch their properties from short-term to long-term rentals.

The aim of the measure, which is part of the government's plan to tackle the housing crisis, is to open up closed apartments and make them available for long-term rentals in order to increase the supply of properties on the market and bring down rental prices.

The income tax exemption will be for a specific period of time, 2 to 3 years, provided that the landlord opens his closed apartment and makes it available for long-term rental.

The measure will be accompanied by an increase in the subsidy for the renovation of closed properties under the "Renovate-Rent" programme. For the programme, it is being considered to increase the subsidy to 60% from the current 40% and to raise the expenditure ceiling to €15,000 from €10,000.

Rental income is taxed from the first euro at a rate of 15% as long as the income does not exceed 12,000 euros. For higher income brackets, rates of 35% -45% apply, namely 35% for the income bracket from 12,001 to 35,000 euros and 45% for the income bracket above 35,001 euros. Rental income on an annual basis is in the region of EUR 6.5 billion with almost eight out of ten taxpayers declaring an annual income of up to EUR 5,000 while 14% declare incomes between EUR 5,000 and 10,000.

With rental prices rising rapidly in recent months and demand for housing being strong, there is no shortage of property owners who are considering a return to long-term leases. For them, the tax incentive looks tempting. With the exemption, a landlord who receives rents of 1,000 euros per month will have an annual tax benefit of 1,800 euros, while if he receives rents from short-term rentals of 20,000 euros, the tax benefit rises to 4,600 euros per year.