Rental income is liable to either Rent Tax or VAT (refer flowchart below)
What is Rent Tax?
- Rent tax is imposed under the Rent Tax Act [CAP 196] and is payable on rental income
- Rent tax is charged at a rate of 12.5% on rental income in 6-month periods.
- Rent tax is charged on gross rental income – expenses are not able to be claimed
- For landlords that are individuals, the first VT 200,000 of rental income is exempt
- Each year a landlord will file 2 x 6 monthly returns.
When is Rent Tax Applicable?
- Rental income is liable to either Rent Tax or VAT (refer flowchart below)
- If VAT is not being charged on rental income, then that rental income is subject to rent tax.
- it is rent from long term residential property that is subject to Rent Tax
- Commercial and short-term residential rent is subject to VAT – but if the rental income is below the VAT threshold (VT4M) and the landlord has not voluntarily registered for VAT, then that rental income is subject to Rent Tax
Chargeable Periods + Due dates
Rent tax returns are required in 6-month periods. The periods are:
1. 1st December to 31st May – return and payment is due by the 28th June
2. 1st June to 30th November - return and payment is due by the 28th December
Jointly Owned Property
There are rules for the treatment of jointly owned property – refer to Rent Tax Return form
The record keeping requirements for persons subject to Rent Tax are specified in section 8 of the Tax Administration Act no.37 of 2018
All businesses and property investors must keep records that correctly explain all transactions they enter as a business or investor.
Generally, records must be retained for at least 5 years after the end of the tax period to which they relate. Where there has been amended assessment or a tax audit, the record retention period is extended.
If a business ceases, records must still be retained for the 5-year period.
If you fail to file your Rent Tax on time, or your fail to make payment of your Rent Tax return late, penalties and/or interest will be charged as follows:
If you file late:
- A late filing penalty of VT 30, 000 (for an individual) or VT 50, 000 (for an entity),
- For each day that the return remains outstanding, a late filing penalty of VT 3, 000 (for an individual) or VT 5,000 (for an entity).
If you pay late:
- A late payment penalty of 5%of the total that should have been paid,
- For each day until payment is made, late payment interest at a daily rate of 20% per annum.
Click here to access Rent Taxation Return Form
Click here to access the Rent Tax brochure
Click here to access the Penalties brochure