> For the complete documentation index, see [llms.txt](https://help.immodio.app/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.immodio.app/en/anleitung/einnahmen-und-ausgaben/buchhaltung-erweiterung/10081000-kaltmiete-fuer-gewerbevermietung-inklusive-19-umsatzsteuer.md). # Base rent for commercial lettings (including 19% VAT) Help on the Immodio entry item Base rent for commercial letting (including 19% VAT).
Use this category for **base rental income from a commercial letting where the letting is effectively subject to 19% VAT**. Typical cases can be, for example: * office space, * shop units, * practice or chambers premises, as far as the conditions for liability to VAT are met, * storage or commercial space, * workshop space, * other commercially used premises, where you as the landlord may treat, and do treat, the letting service as subject to VAT. #### Commercial letting is in principle exempt from VAT The fact that premises are used commercially does **not automatically** mean that 19% VAT has to be charged on the rent. The letting and leasing of land is **in principle exempt from VAT under Section 4 no. 12 letter a of the German VAT Act**. That initially also applies to office, shop, storage and other commercial premises. Under certain conditions, however, the landlord can **waive this exemption under Section 9 of the German VAT Act**. This decision is frequently called: the **option for VAT** or the **option for liability to tax**. Only once this option is exercised permissibly does the base rent belong in this category. #### When may a letting be made with 19% VAT? Two conditions in particular have to be met for the option: * The tenant in principle has to **be a business and use the premises for their business**. * The tenant in principle has to use the premises for transactions that **do not exclude the deduction of input VAT**. For lettings of land, Section 9 (2) of the German VAT Act in principle requires the tenant to use, or intend to use, the land exclusively for transactions that do not exclude the deduction of input VAT. The landlord has to prove that the conditions are met. #### Example: the office of an ordinary company You let office premises to a GmbH. The GmbH uses the premises for its ordinary business activity subject to VAT and is entitled to deduct input VAT on its inputs. * The monthly net base rent: **€2,000** * plus 19% VAT: **€380** * the amount payable by the tenant: **€2,380** The conditions for a commercial letting subject to VAT can then in principle be met. The **€2,000 of net base rent** is part of the base rent subject to VAT; the **€380 of VAT** is treated separately for VAT purposes. #### Not every commercial tenant makes the option possible This point is particularly important. Even where the tenant is a business and clearly uses the premises commercially, the landlord may not automatically charge 19% VAT. Tenants who predominantly provide **services exempt from VAT** in the premises, and who therefore have no deduction of input VAT to that extent, are particularly problematic. A classic example is certain medical treatments. The VAT application decree expressly names a dentist: as far as premises are used for exempt dental services, the landlord's option is in principle not permissible. For a spatially separate area with an activity subject to VAT, by contrast, a different assessment can be possible. Corresponding checks can be necessary, for example, with: * doctors and other health professionals, * certain insurance or financial service providers, * certain educational or social institutions, * businesses with largely exempt turnover, * small businesses. What matters is not the job title alone but the **actual use of the premises for VAT purposes**. #### A small business as tenant A business using the small business rule can also be problematic. For this assessment the tax authorities in principle treat a small business as a recipient of services not entitled to deduct input VAT. The landlord's option is therefore regularly not possible. #### The landlord itself may not remain a small business either Where the landlord itself uses the small business rule under Section 19 of the German VAT Act, its turnover falling under that rule is exempt. Section 9 of the VAT Act does not apply to that turnover. A landlord can, however, waive the small business rule and switch to general taxation of turnover. Under the current statutory rule that waiver in principle binds them for at least five calendar years. A commercial rent therefore only belongs in this 19% category where the VAT conditions are also met **on the landlord's side**. #### Do not simply add 19% to every commercial rent A landlord should not charge VAT merely because the rental agreement says "commercial premises". Where VAT is shown even though the landlord is not entitled to do so, Section 14c of the German VAT Act can mean that the amount of tax shown is nevertheless owed to the tax office. #### How is the option exercised? No particular statutory form is in principle prescribed for the option with an ordinary letting. The option is often apparent from the landlord treating the letting as subject to tax and **showing VAT separately** to the tenant. A clear provision in the commercial rental agreement is, however, sensible in practice. For example: **A net base rent of €2,000 plus statutory VAT, currently 19%.** That makes it clearly apparent to both parties how the rent is treated. #### Document the tenant's use Under Section 9 (2) of the German VAT Act the landlord has to be able to prove that the conditions for the option are met. Under the VAT application decree no particular form is prescribed for this. The evidence can follow, for example, from: * a confirmation from the tenant, * provisions in the rental agreement, * other suitable documents. A constantly repeated confirmation is in principle not necessary as long as no change of use is to be expected. In an individual case, however, a further or annual confirmation can be necessary. For a commercial rental agreement a clause is therefore sensible under which the tenant informs the landlord of changes in their use for VAT purposes. #### Example: a change of use by the tenant You have let an office to a company subject to VAT for several years. The company later changes its activity and uses the premises in future for exempt transactions that exclude the deduction of input VAT. The previous condition for the option can then cease to apply. A change from land use subject to tax to exempt use can also affect an earlier deduction of input VAT by the landlord and, where applicable, the adjustment of input VAT under Section 15a of the German VAT Act. The tax authorities name precisely the switch between letting subject to tax and exempt letting as a possible case for adjustment. A substantial change of use by the commercial tenant should therefore be checked not only under tenancy law but also for VAT. #### A building let partly subject to VAT A building can be let exempt and subject to VAT at the same time. For example: * **the ground floor → a shop unit, subject to VAT** * **the 1st floor → a doctor's practice, exempt** * **the 2nd floor → an apartment, exempt** The VAT treatment is in principle assessed separately for the independently usable parts of the property. The VAT application decree expressly names apartments, commercial space and office and practice premises for this. #### Only the base rent, no advance payments of operating costs This category is expressly intended for the **base rent excluding recharges**. Enter the ancillary costs in the category "[Advance payment of ancillary costs / operating costs for garages and other premises (19%)](/en/anleitung/einnahmen-und-ausgaben/buchhaltung-erweiterung/10144900-vorauszahlung-nebenkosten-betriebskosten-fuer-garagen-und-andere-raeume-19.md)" #### The advantage of the VAT option: a possible deduction of input VAT An essential reason for a commercial letting subject to VAT can be that the landlord can thereby, where all the conditions are met, deduct input VAT on costs attributable to the area let subject to tax. With an exempt letting of land, corresponding amounts of input VAT are in principle excluded. The tax authorities name, for example, input VAT on acquisition, production, maintenance expenditure, legal advice and property management as typical cases with exempt letting. With a building containing exempt and taxable areas, a split of input VAT can therefore become necessary. #### Do not enter here Do not use this category in particular for: * exempt commercial rents, * ordinary residential rents, * advance payments of operating costs, * additional payments of operating costs, * deposits, * commercial rents where the option under Section 9 of the German VAT Act is not permissible, * the turnover of a landlord who still applies the small business rule. #### Which documents should you keep? Keep in particular: * the commercial rental agreement, * the agreement on VAT, * a confirmation from the tenant of their business use that does not harm input VAT, where applicable, * later notifications of changes of use, * the standing invoice or invoice documents, * bank statements for the rent payments, * operating cost statements, * VAT returns and annual declarations, * documents on the deduction of input VAT on the acquisition, production or refurbishment of the building. Evidence of the permissible option is particularly important, because Section 9 (2) of the German VAT Act expressly places the burden of proof on the landlord.