We show you what you need to bear in mind regarding accounting and VAT when waiving rent.
Corona has changed a lot. Some companies have found themselves in financial difficulties. However, there is excellent solidarity with these companies. Property owners support them with rent reductions, and depending on the canton or municipality, these reductions are also subsidized by the public sector.
Rent waiver/rent reduction from an accounting perspective
How should rental expenses be accounted for during the period when the business is closed?
- The co-expenses would have been incurred even without the closure of the business. This is not an additional expense. It is therefore not possible to show them in the extraordinary result.
How must a special discount on contractually owed rent be booked?
- If the owner gives the discount, you must record the discount as a reduction in rental expenses.
- If the government ordered the reduction, you can show this in the extraordinary result.
Rent waiver/rent reduction and VAT
The correct handling of rent reductions for VAT purposes must be considered and analyzed on a case-by-case basis. We will show you two possible cases.
How must VAT be accounted for if the owner grants the tenant a rent reduction but is not supported himself?
- In this case, it is a reduction of rent. The owner must pay less VAT. As a result, the tenant can claim less input tax.
- Exception: The premises are rented out exempt from tax. This then does not affect the owner's VAT or the tenant's right to deduct input tax.
How must the VAT be accounted for if the landlord grants the tenant a remission but the remission (or part of it) is later reimbursed by the canton / municipality?
- Contributions from the public sector are generally considered subsidies. It is irrelevant whether the subsidy flows directly or indirectly through a transfer (Art. 29 and 30 VAT Ordinance). The subsidy recipient is subject to a possible reduction of input tax (Art. 33 paras. 2 MWSTV).
- In this case, the recipient of the subsidy is the owner. The owner must declare the subsidies in the VAT statement (item 900). If he has a right to deduct input tax, he must reduce the input tax (item 420).
- For the tenant, the waiver of rent represents a reduction in revenue. As a result, he can claim less input tax.
Do you need advice on a specific case? Then contact us - we will be happy to advise you straightforwardly.
