Tax obligations of landlords when renting real estate

What taxes do landlords have to pay and how are these taxes are calculated?

Renitng out your property can be a source of additional income, but with it comes the responsability of paying taxes. Regardless of whether you are new to renting or are a seasoned property owner, it is important to have a clear understanding of the tax obligations that arise form the activity.

In this article, we'll explore what taxes landlords need to pay and how those taxes are calculated, giving you a comprehensive overview to ensure you're fully informed and ready to effectively manage your property.

Tax regulations for rental property: It is important to note that regulations may differ from country to country and even from canton to cantom. It is therefore advisable to consult local tax experts for accurate information and advice. Different tax rates, expense recognition and other specifies can affect your tax obligations.

Tax on rental income: The income you get from renting out an apartment is considered income and is subject to taxation. This tax is ussualy calculated on the basis of the total rental income minus the maintenance and management costs of the property. Deductible expenses typically include expenses such as utilities, property taxes, insurance, and repairs. It is important to have a detailed overview of all income and expenses in order to correctly calculate the rental income tax.

Property rental tax: Property owners are required to pay property rental tax, which is based on the assessed value of the property. The amount of rental property tax varies depending on the value and location of your property.

Property tax is paid in aan annual lump sum that cannot be less than:

For a building or apartment for rest and recreation, 3 KM per 1sqm
For a business premises, a residental building or an apartment that is leased, 4 KM per 1sqm
For garages that are leased, 3 KM per 1sqm (Article 22)

Amount of tax and recognition of expenses: Property income tax is paid at 10% on the income tax base, which is the difference between the total taxable income minus the expenses that are recognized. When it comes to renting immovable and movable property, expenses recognized for the period of rental income amount to 30%. However, it is possible to realize the recognition of expenses of 50% of the income generated form the rental of apartments, rooms and beds to travelers and tourists for which the residence tax is paid.

Record keeping: It is important to keep detailed records of income related to rental property. This will help you calculate taxes correctly and facilitate communication with the tax authorities in the event of an audit. Proper record keeping can also help optimize costs and increase the profitability of your business.

The Law on Tax Administration of the FBIH presvribes penalties for failure to submit tax returns. With a proper understanding of tax obligations and careful monitoring of financial flows, renting out your property can be a successful and profitable business venture. Therefore, regular monitoring of your tax obligations is essential to avoid penalties.

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