Value Added Tax (VAT) on Office Rent - When Can It Be Charged?

In general, office properties are exempt from value added tax, but it can happen that VAT is charged on office rent. Landlords have the option to request VAT despite the exemption from tax.

The reason for this may be that the landlord wants to claim input tax deduction, for example, for renovation work on the property.

However, to charge VAT, certain conditions must be met:

• The rental is only for businesses and must serve the business purpose of the renting company.
• The rental period must be longer than 6 months.
• The tenant must provide taxable services. Doctors, schools, or small business owners do not provide taxable services and are therefore not entitled to input tax deduction. Therefore, the rental is mandatory tax-free.

Necessary agreements in the lease agreement

To avoid potential explanations to the tax office, it is important to clearly state the VAT position in the lease agreement.

In principle, the lease agreement must be seen as an invoice. Therefore, attention should be paid to the following points:

• Rent, ancillary costs, and the corresponding VAT must be clearly itemized.
• Naming of tax number or VAT identification number of the landlord.
• Alternatively, the landlord can issue monthly invoices - also here, with a breakdown of VAT and gross and net amounts, a consecutive invoice number, and tax number or tax ID.

Case of Co-Working Spaces

For most co-working spaces or business centers, VAT is due on the rent. In this case, the use of office space is seen as a service, as often not only the pure rental of space is offered, but also additional services such as a business address, use of printers, beverages, etc.

Regardless of whether the rent is charged with or without VAT, for businesses, only the net amount is ultimately due. Therefore, when searching for offices, it should be noted that office rents are generally advertised as 'net'.