Photo: PixabayAstronomical rent prices have once again brought into focus the issue of earnings and property rental taxes. The problem has culminated these days, because some landlords were worried about the large influx of Russian and Ukrainian citizens coming to Serbia, so they suddenly raised the rents of subtenants who had long-term leases - some even doubled them, from 300 to even 600 euros, writes Euronews Serbia.
The owners of the apartments, however, could not have done it so easily if the subtenants had certified and fixed-term contracts, because neither of them has insisted on this until now. Landlords are reluctant to give up 20 percent of their income, which is tax, while tenants were worried that this burden could be transferred to their rent, so they agreed to rent an apartment without any contract. In this vicious circle, the state also loses money, because it does not generate income from tax collection.
According to the latest data from the Tax Administration for the last year, less than 2,000 real estate owners pay tax on the rental of real estate to the state. On the other hand, according to the last census from 2011, as many as 122,530 people stated that they live in other people's apartments and pay rent, while another 136,949 stated that they live in real estate belonging to their relatives. In the following period, data from the latest census, which is being completed these days, will be available, when it will be known whether the number of such apartments has increased further.
The Tax Administration did not respond to Euronews Serbia's questions regarding the property rental tax and the number of property owners who pay it. As this portal unofficially learns, a new way of reporting this tax electronically, as introduced in some other sectors, is being considered, so it is expected that it could contribute to better control in this area.
"WEAK CONTROL THE BIGGEST PROBLEM"
Experts say that weak inspection supervision is the main reason that landlords are not motivated to report rental income, because the Tax Administration does not have a sufficient number of inspectors who could bring order to this area, but react only upon reporting. Tax advisor Aleksandar Vasić tells Euronews Serbia that this is precisely the weakest link and indicates that the control mechanism can only be established with communication between state authorities in each segment.
"All tax malfeasance is discovered by establishing some irregularity through the documentation. It is unlikely that the police or the inspectorate will come to the apartment and force someone to register. "The real estate rental tax is 20 percent, but those who avoid it would not pay it even if it were 10 percent," Vasić believes.
He also points out that still a small number of people report residence in the places where they essentially live, and that with better control of residence, it would be possible to gain insight into whether property rental tax is paid.
"When you rent an apartment to someone and he wants to register his residence, the MUP requires the consent of the owner of the apartment. He goes to the police and gives his consent. However, the question is whether the MUP then exchanges that data with the Tax Administration, so that the inspection can then check why someone came to live there. In general, this exchange should work and that is what is crucial in order to increase the coverage of tax payments," Vasić believes.
He notes that stronger and more rigorous control is necessary for those who have more real estate and who practically live off the rental. The tax advisor says that companies that rent out real estate are more diligent in paying taxes, because they operate according to different principles compared to citizens who rent out one or two apartments.
"The state must establish a better system, because a large amount of money is in circulation in these issuing businesses, and therefore a large tax. Of course, this concerns natural persons, because when it is issued to legal persons, they end up paying tax as part of their debts. Whoever buys three apartments in Belgrade on the water will not rent them out to students from the interior for 200 euros in cash. They are issued to companies, ambassadors, company directors, for which the company again pays, and then it enters the legal channels. "The largest number of expensive real estate and significant incomes should be covered by the tax, while the small ones, such as the rental of a studio apartment, are no longer covered," says Vasić.
TAX ON PAPER ONLY
Real estate agent Miroslav Cvetković says that in every lease agreement there is a clause on the payment of rent tax.
"A large number of foreigners are now with us, and that's why landlords have to report them." I don't know if they all continue to pay taxes to the state, we have no further insight than that. In our contract, it is written that there is a tax obligation. However, we cannot take them by the hand and lead them to report and pay taxes. It is certainly our duty to instruct them on how to complete the work in accordance with the law. "I know that there was a big problem with that because a lot of people didn't pay taxes, that's why, among other things, building managers were hired," says Cvetković.
He also notes that it is important for agencies that the tax payment clause is included in the contract, because "you never know how things will go between someone who rents out an apartment and a tenant."
"It is possible, for example, that there may be a dispute and it may go to court, so we as an agency should have a fence." Real estate prices did jump, especially due to the arrival of foreigners, primarily Russians. It normally goes in waves and we are now in a period when they are very high. Recently, we always lack quality real estate for rent, because there are really very few of them on the market now," Cvetković says.
TENANTS INVISIBLE TO PROFESSIONAL MANAGERS
And the introduction of a new profession - professional managers, was announced a few years ago as a form of pressure on landlords to start registering the residence of tenants and paying taxes. It was speculated that the landlords will immediately raise the rent to the subtenants, if these new solutions force them to finally register the subtenants and pay the corresponding tax on renting out the property.
The president of the Association of Professional Managers Ljubiša Banovački, however, tells Euronews Serbia that they do not have the status of an official and that they cannot ask for documentation on the ownership of apartments, so they do not deal with it at all.
"It is important for us to know who lives in the apartment because of possible breakdowns and breakdowns." Tenants are difficult to trace. Apartment owners generally say that they are their relatives and if they pay everything regularly and do not disturb public order and peace, they are practically invisible to the system. We have examples of buildings where there are more apartments for rent, compared to those where the owners live," says Banovački.
He also points out that foreigners who have been arriving in recent months, primarily Russians, are asking landlords to register them at their address.
Real estate agents point out that signing the contract is important for several reasons and that, in a way, it still gives security to both tenants and landlords. They recommend that tenants sign a fixed-term contract, at least for one year, with the amount of the monthly rent and a clause during which the rent will not change, as well as with the specified notice period, so that they do not have to look for new accommodation overnight. On the other hand, the contract also protects the landlord from unscrupulous tenants, if they are left behind with unpaid bills or damage to the apartment. The absence of a contract certainly makes it difficult to prove their rights in court.
Source: euronews.rs
