Are you renting out a property and wondering whether to settle it as a private rental or through a business? We compare taxes, ZUS and VAT so you can make an informed decision.
Do you own a flat, commercial premises or a house and want to rent it out – but you are unsure whether it is better to do so privately or through a sole-trader business (JDG)? This is one of the most common questions that property owners bring to us. The choice of tax form and legal structure has a direct impact on the amount of tax payable, obligations towards ZUS and any potential VAT liability. In this article we explain the key differences, highlight typical pitfalls and help you assess which option may be more advantageous in your situation.
Private rental is the letting of a property outside of a business – as a natural person, without registering a company. Since 2023 the only available form of taxation for private rental is the lump-sum tax on recorded revenues (ryczałt od przychodów ewidencjonowanych). The lump-sum tax rates are: • 8.5% – on revenues up to PLN 100,000 per year, • 12.5% – on the surplus above PLN 100,000. Tax is calculated on revenue (with no possibility of deducting costs such as renovation or depreciation). This is a simpler solution from an administrative standpoint – it does not require full bookkeeping, and no ZUS contributions are paid solely on account of private rental.
When you let property in an organised and continuous manner – for example, you manage several premises, actively seek tenants or provide additional services – the tax authority (urząd skarbowy) may determine that you are running a business, even if you have not registered one. When conducting rental through a company (JDG), you may choose the following form of taxation: 1. Lump-sum tax (rate 8.5%/12.5%) – the same as in private rental, but with a ZUS obligation. 2. Flat income tax at 19% – with the possibility of deducting tax-deductible costs. 3. Progressive tax scale 12%/32% – less commonly chosen at higher income levels. The key difference is the obligation to pay ZUS contributions (including the health contribution), which is unavoidable under a JDG.
Private rental is entirely outside the ZUS system. This means that a natural person renting out property privately pays no social or health contributions on that account whatsoever. In the case of a business, the situation is fundamentally different. A sole trader must pay full ZUS contributions (or preferential ones during the first years of operation), including the health contribution, the amount of which depends on the chosen form of taxation and the income earned. For many property owners, ZUS is the decisive argument against registering a business solely for rental purposes. Of course, if you already run a JDG for another purpose, including rental within the business does not generate additional contributions beyond those you are already paying.
Private rental for residential purposes is VAT-exempt with no turnover limits. This simplification is appreciated by owners of properties let on a long-term basis. The situation becomes more complex when letting commercial premises or in the case of short-term rental (e.g. nightly letting – tourist apartments). In such cases: • Private rental of commercial premises may be subject to VAT once the subjective VAT exemption threshold is exceeded (PLN 200,000 in annual turnover). • Rental through a business – a VAT-registered entrepreneur must charge VAT on commercial rental services. • Short-term rental (similar to a hotel) is treated as a tourist service and is subject to VAT at 8%. The type of property being let and the manner in which it is used by the tenant are of fundamental importance here.
This is one of the most common misconceptions: that introducing a property into a business allows for depreciation and the deduction of renovation costs. Since 2023, depreciation of residential buildings and premises within a business has been completely excluded. For commercial premises, depreciation remains possible – this is a significant advantage of operating through a business over private rental when it comes to commercial properties. Under a JDG (flat tax or progressive scale), you may however deduct current costs: • interest on a loan taken out to purchase the property, • management and agency fees, • expenditure on renovations and maintenance, • property insurance. Under the lump-sum tax – whether private or through a business – costs are not deducted, because tax is calculated on revenue.
There is no single universal answer – everything depends on the scale of letting, the type of property and your overall tax situation. Private rental (lump-sum tax) is advantageous when: • you are letting one or several flats for residential purposes, • your rental revenues do not exceed PLN 100,000 per year, • you want to avoid ZUS and complex bookkeeping. A business may be a better option when: • you are letting commercial premises and can depreciate the property, • you have high costs (renovations, a loan) and want to deduct them under the flat tax, • you already run a JDG for another purpose – rental can then be included without additional ZUS contributions. It is also worth bearing in mind that tax authorities may challenge private rental status if they determine that the activity is organised and continuous.
The choice between private rental and rental through a business is a decision that should be preceded by an analysis of your individual situation – revenues, costs, type of property and future plans. Incorrect classification may result in tax arrears or unnecessarily high ZUS contributions. The experts at Danexis accounting firm will help you choose the optimal form and ensure your settlements are handled correctly. Contact us on +48 780 760 666 or write to us at kontakt@danexis.pl – we will be happy to answer your questions.