VAT liability due to parking space rental

In principle, the rental of real estate is an exempt supply within the meaning of VAT. However, the rental of parking spaces is expressly taxable. If only exempt supplies (e.g. rental of residential properties) or taxable supplies of less than CHF 100,000 are generated, a company is exempt from VAT liability.

As soon as the taxable turnover exceeds the limit of CHF 100,000 per company, it must register in the VAT register for the following year without being asked to do so. In the case of a large real estate portfolio, it is therefore important that this turnover limit of CHF 100,000 from taxable supplies is reviewed annually.

The turnover limit of CHF 100,000 could be exceeded, for example, by taxable services such as the rental of parking spaces to external tenants, key money or the charging on of tenant improvements (if settled with a one-off payment).

However, when parking spaces are rented out, the rental can also be treated as an ancillary service to the main rental agreement for the property. This means that the rental of the parking space shares the same VAT treatment as the rental of the property. However, the tenant of the property and the tenant of the parking space must be identical. However, if a parking space is rented to an external tenant, this constitutes a separate taxable supply.

In the case of large real estate portfolios, management activities are often outsourced to various external service providers. However, as the taxable entity is the company as a whole (e.g. a real estate company or an investment fund), the entire portfolio must be considered when reviewing the turnover limit of CHF 100,000. In this respect, it is important that the VAT liability for the entire real estate portfolio is reviewed annually. Due to the different and divided responsibilities, this annual review is made more difficult or is often lost in a constantly growing real estate portfolio.

If the review was neglected and the VAT liability was discovered or reported too late, the FTA will review the last 5 years (limitation period). The VAT will then be subsequently charged with interest of currently 4%. If the declaration was intentionally omitted, additional criminal tax proceedings cannot be ruled out.

As the tenants, particularly of parking spaces, are often private individuals, VAT can often no longer be passed on to the tenants retrospectively. Accordingly, the landlord is stuck with the VAT until the next possible contract adjustment. In the case of tenants liable for VAT, the passing on of the VAT is regularly accepted, as these tenants can in turn deduct the VAT as input tax.

We will be happy to assist you with checking your VAT liability or registration in the Swiss VAT register and with other VAT-related questions.