What does the new vacancy rate ratio mean for the tax valuation of rented properties?
There have been plans for some time to increase the tax burden on rented properties by adjusting the so-called "vacancy rate ratio." On Budget Day, the vacancy rate ratio, effective January 1, 2023, was announced.
Vacancy ratio.
The taxable value of rented properties with rent protection is determined by multiplying the WOZ value by the vacancy rate. This value is important for gift and inheritance tax and for tax assessments in box 3.
Background of the vacancy rate ratio
Value pressure on rented property.
The vacancy rate ratio is determined by the ratio of the annual rent to the property's WOZ value, or in other words, the direct return. It essentially adjusts for the lower market value of a rented property. This adjustment is necessary because the WOZ value assumes full and unencumbered ownership.
Rent protection.
The vacancy rate ratio reflects the fact that tenants generally enjoy rent protection. Because of this rent protection, a new owner cannot simply raise the rent or attract new tenants.
Vacancy ratio 2022
The vacancy rate ratio for 2022 is shown in the table below, where the annual rental income is expressed as a percentage of the WOZ value of the rented property.
| More than | No more than | Vacancy value ratio |
| 0% | 1% | 45% |
| 1% | 2% | 51% |
| 2% | 3% | 56% |
| 3% | 4% | 62% |
| 4% | 5% | 67% |
| 5% | 6% | 73% |
| 6% | 7% | 78% |
| 7% | – | 85% |
Example.
The table shows that for a home with a WOZ value of, for example, €300,000 and a rental income of €600 per month, a percentage of rental income of €7,200/
€300,000 = 2.4%. The vacancy rate for 2022 is then 56%, meaning the property has a taxable value of €300,000 x 56% = €168,000.
From 2023
Abolished in some situations.
The government wants to update the percentages in the vacancy rate table for rented properties. This will result in landlords paying more tax on the properties they rent out. Furthermore, starting in 2023, the government wants to apply a vacancy rate of 100% for temporary leases and rentals to affiliated parties. Note: If, in our example, it concerns a temporary lease or a lease with affiliated parties, the vacancy rate for this property will be set at 100% in 2023, increasing its value to €300,000.
What's the difference now?
The new tax in Box 3 will be based on the so-called "savings variant." Specifically, this means that in the aforementioned example, an additional return of 6.17% is assumed on €132,000, or €8,144. In 2023, you will pay 32% in tax on this in Box 3, which is €2,606 more than now. The amounts for inheritance and gift tax are higher. Even for gifts or inheritances at the lowest rate, e.g., for children, an additional tax of 10% x €132,000 = €13,200 is levied.
As of January 1, 2023, the vacancy rate will be 100% (and will therefore be abolished) for properties rented temporarily and for rentals between related parties. These properties will then be taxed for their full and unencumbered ownership.
