How much do I have to know about my tenant?

[Michaeldon]

Hi all

VAT question here. If I own a building and I sublet it europa.eu says it should be exempt from VAT except in some cases.

If I rent it to someone and give him the right to sublet do I need to check what he is doing in that respect? If he is carrying on a commercial activity there I should charge VAT, but if I give him the right as a company to be a long term tenant do I need to care about that?

Cheers

 

[Michaeldon]

Here is the actual text from Europa.eu

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• Based on the VAT directive 2006/112/EC, the member states shall exempt the following:
  
  
  • the supply of a building or parts thereof, and of the land on which it stands, other than the supply before first occupation;
  • the supply of land which has not been built on other than the supply of building land;
  • the leasing or letting of immovable property.
  
  According to the VAT directive, the exemption of
  the leasing or letting of immovable property does not apply to the
  following activities:
  
  
  • the provision of accommodation, as
  defined in the laws of the member states, in the hotel or in sectors
  with a similar function, including the provision of accommodation in
  holiday camps or on sites developed for use as camping sites;
  
  • the letting of premises and for the parking of vehicles;
  • the letting of permanently installed equipment and machinery;
  • the hire of safes.

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[David Griffiths]

The basic rule is that rental of ALL property is exempt - commercial and residential.

In the case of commercial property, the owner may elect to waive the exemption - i.e. treat the building as taxable. In that case the landlord charges VAT on the rent, but can claim input tax on expenses. The landlord must also charge VAT when the building is sold.

If you haven't waived exemption (and you almost certainly haven't), the building is exempt and it doesn't matter what you, your tenant or subtenant use it for

 

[Michaeldon]

Perfect, thanks David

 

[David Richards]

Here is the actual text from Europa.eu

Based on the VAT directive 2006/112/EC, the member states shall exempt the following:

Whilst Europa is a good website for getting a general overview of the principles and the details of EU Directives, do remember that directives are subject to interpretation by each member state. And they don't always interpret them in the same way. Plus sometimes there are derogations for individual states.

So it's always worth checking the detail with the tax authority in the relevant member state - in this instance it would be HMRC VAT Notice 742.