Information about renting with VAT

SKAR preferably rents out studios with VAT. As a SKAR tenant, you are selected for your professionalism, which means that you rent the studio as an entrepreneur. And (most likely) can deduct VAT. This way we can keep the costs for the artists as low as possible. After all, we can deduct the VAT we have to pay on maintenance and investments in the buildings. If we cannot do that, we will eventually have to pass these costs on to our tenants.

However, VAT-tax hiring out is not self-evident. For the person who rents a space, it is good to know that whether or not to deduct VAT is something the tenant and landlord decide together. This happens when entering into the contract. So you can choose to rent with or without VAT.

If, as a tenant, you have entered into a contract with a landlord that is subject to VAT, you must meet the requirement that your (tenant) is known to the tax authorities as an entrepreneur and you can deduct at least 90% of the VAT on the rent of the property as input tax. If you can no longer meet this requirement, you must report this to the landlord (SKAR) - this is an obligation. The right to set off VAT on the rent will then disappear - the lessor may no longer charge you VAT and the tenant may no longer set it off.

If the right to a taxed rental lapses, the VAT charged to the lessee will be regarded as unjustified, and VAT deducted by the lessor may therefore be regarded as unjustified.

And then it depends on the contract you have concluded what the consequences are. The lessor, in this case SKAR, can no longer fully reclaim the VAT it pays. This entails costs. It must be possible to pass these on. This is done on the basis of a provision in the contract, which states that in that case the tenant will owe the lessor a separate fee in addition to the rent. This is an amount to compensate for the disadvantage suffered by the lessor because the turnover tax on the investments and operating costs of the lessor are not (or no longer) deductible. That amount can be as high as the VAT percentage. It is not a rent increase, but it does increase your costs. But it is also possible that the contract states that if you are no longer allowed to rent with VAT, this may be a reason to terminate the lease. Especially in buildings in which a lot has been invested, this could be the case. In those buildings SKAR will have to let out VAT for ten years, otherwise the VAT will still be recouped from the investments on SKAR. If SKAR is no longer able to reclaim the full cost of the VAT, this may in extreme cases mean that the rents will have to be increased. But SKAR would like to avoid this if at all possible.

For more information, please visit the site of the Tax and Customs Administration.

If you are in the Small Business Scheme, you can find information here.