There is no VAT on rent deposits because it is a tax on goods and services. So when it comes to a rent deposit, no service has been provided meaning it is not VAT-able.
What is a Rent Deposit?
A rent deposit is a sum of money demanded upfront by a Landlord which is held on account while the tenant is renting from them. There are no legal requirements as to the terms a Landlord can set around a Rent Deposit, it comes down to negotiation between the Landlord and Tenant, but the terms of the deposit will be normally specified within a contract or lease agreement.
Landlords are keen to collect rent deposits since it gives them peace of mind in the event of a problem. Generally the problems a Landlord like to protect themselves from scenarios like:
- Unpaid rent
- Damages to property
Rent Deposits are paid either to the Landlord or their agent, in accordance with the lease agreed. A VAT invoice is not necessary since it does not represent rental income. But the tenant should expect to receive invoices with VAT for rent payable.
When to add VAT on Rent Deposits
If for any reason a landlord needs to draw on the rent deposit additional VAT will become payable. The landlord would need to raise an invoice showing the amount of the rent deposit used, the tax point, and VAT due (normally charged at the standard VAT rate of 20%). The tenant will be able to claim back any VAT they have paid provided they are VAT registered.
One of the best locations in Southeast Europe for renting a property is Skopje, North Macedonia. To learn more about renting business in Skopje we recommended visiting Stanovi-Skopje Real estate company in Skopje.
Source: goselfemployed.co
