When does rental income become subject to VAT?

Understanding when a rental becomes subject to VAT is important for both landlords and tenants. VAT obligations affect not only the rental price but also how the rental must be reported to the tax authorities. In this article, we cover the key points of VAT on rentals, including what VAT liability means, when a landlord must register for VAT, how VAT affects rental income and the specific rules for commercial rentals and short-term rentals.

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"Most residential rentals are exempt from VAT, but there are exceptions. Make sure you understand whether VAT applies, especially if you provide additional services."

VAT liability means that the landlord must add value-added tax to the rent and report it to the Swedish Tax Agency. In Sweden, the rental of real property is generally exempt from VAT.

However, there are exceptions. For commercial premises, a landlord may choose voluntary VAT registration. This allows the landlord to charge VAT on the rent and deduct input VAT on expenses related to the rental.

For residential properties, rentals are normally exempt from VAT. This means you do not add VAT to the rent and you do not report VAT.

There are exceptions, especially when the rental resembles hotel-type accommodation. If you rent out furnished housing for short periods to different guests and provide services such as cleaning or bed linen, the rental may be considered VAT-liable. In these cases, you must register for VAT and report VAT on the rent. It is important to assess the nature of the rental carefully to determine whether VAT applies.

If a rental becomes subject to VAT, the landlord must add VAT to the rent. The VAT rate depends on the type of rental:

This increases the total cost for the tenant, which may affect demand. At the same time, the landlord gains the right to deduct input VAT on costs related to the rental, such as maintenance or repairs. It is important to consider both the benefits and drawbacks before registering for VAT.

Guestit is a platform for short-term rentals that makes it easy to rent out your property. We provide services such as cleaning and linen changes, which means that 12% VAT is automatically added to the rental price. As the landlord, you are responsible for declaring your rental income to the Swedish Tax Agency. Guestit handles the practical side of the rental process to ensure a smooth experience for both hosts and guests.