The tax administration in Kosovo is hoping to make collecting taxes on rental properties easier.
By Muhamet Brajshori and Ivana Jovanovic in Pristina and Belgrade -- 18/02/13
Collecting rental taxes on apartments is difficult, according to the government. [Gabriel Petrescu/SETimes]
The rental property industry across the region has seen a boom in the economic crisis, but it is causing a headache for tax collectors.
While laws require taxes to be paid on rental properties, many landlords do not report their rent incomes. Due to the fact that rents are often paid in cash and not through bank transfer, payments and taxable amounts are had to track.
If the tenant is a person, paying the tax is the landlord's responsibility. If the tenant is a legal entity, then the tax is paid by the tenant.
The Tax Administration in Kosovo has taken steps to smooth the process by seeking current data through ground inspector visits and obtaining information from third parties. This year they also hope to co-operate with the Statistical Office of Kosovo to be able to review the results of last year's census.
"In the case that the tenant is a person, is a bit more difficult to collect rental tax revenues. The level of awareness of taxpayers is growing and we have increased revenues from year to year in this segment," Valentina Bytyqi-Sefa, a public relations official at Kosovo's Tax Administration, told SETimes.
When the tenant is a legal enterprise or business, collecting the tax is not as difficult, Bytyqi-Sefa said, because in almost all cases the taxes are withheld as a business expense.
In Pristina, renting an apartment varies from 150 euros to 1,500 euros a month. The rental tax rate in the country is 10 percent of the rental amount.
Ferat Syla has several apartments which he rents out in Pristina. He told SETimes that although he has paid his taxes for the last three years, many do not.
"For me it is a business and I do report my incomes and pay taxes, but I know that for many people this is not the case, because they want not to give money, and here you have many ways how you can hide this from administration if you have the will to do so," he said.
In neighbouring Serbia, the problem is the same. Rental tax rate is 20 percent of the monthly rent. Many landlords try to avoid the payments by transfering the tax responsibility to their tenants through the lease.
Rade Jovanovic, a mechanic from Kragujevac, owns small apartment in Belgrade city centre and rents it for 200 euros a month. He pays the taxes himself.
"I pay this amount although I know that it is possible to [offset the tax]. But I do not want to do anything illegally and found this as a good solution for both sides," Jovanovic told SETimes.
According to the Serbia Tax Administration, just 7,006 tax bills were paid on rental property in 2010. Data from banks and real estate agencies in Belgrade show that almost 500,000 people in Serbia rent out flats in the country.