Changes to real estate decree

VAT treatment of utility services and service charges

One of the key changes concerns the VAT treatment of utility services and service charges. In the lease of immovable property, landlords may charge tenants for utility services or service charges in certain cases. This includes costs such as gas, water, electricity (utility services), and services provided by a caretaker, cleaning, and repairs, waste disposal, provision of electronic devices such as an alarm system, and obtaining glass insurance (service charges).

Policy up to and including 2023

Under the old decree, service charges followed the VAT regime of exempted residential rental when leasing a dwelling. For commercial real estate leases, service charges were considered a separate service and therefore usually subject to VAT.

Policy from 2024 onwards

In the new real estate decree, which came into effect on January 1, 2024, it is stated that the services for which service charges are levied should be considered separate services if the tenant can choose who performs the service and/or if the tenant can decide to what extent they use the goods and services. This new policy applies to both the commercial real estate industry and residential leasing. Unlike the old real estate decree, there is no longer a distinction made between residential and commercial real estate.

Utility Services Regarding utility service charges, the new real estate decree specifies that there is at least a separate service if the tenant can determine their own usage of the utility service. The installation of an individual meter and billing based on actual usage are important indicators that the provision of the utility service should be considered a separate service. The fact that the tenant is required to obtain the utility service through the landlord does not change this.

Service Charges Regarding service charges, the new real estate decree specifies that there is at least a separate service if each tenant individually or the tenants collectively can determine who provides the service to them and if this service is separately listed on the invoice.

Whether service charges are subject to VAT will need to be assessed on a case-by-case basis. In practice, this may mean that, for example, VAT must be charged to private tenants for utility services and/or service charges.

To allow landlords time to implement any changes, the State Secretary has approved the continued application of the old policy until January 1, 2025.

Note! It is important to determine whether the above changes have implications for your existing lease agreements.