Despite happening annually, the settlement of accounts with the IRS usually generates doubts even among the most experienced. The question marks also persist when talking about income tax for vacation rentals, mainly because this is a relatively recent activity in Brazil and worldwide. Even more so because the profession is not specifically recognized by the Lion (symbol of the Brazillian IRS), there are a number of particularities that must be taken into account when making the declaration.
The first question that usually arises is the following: should I declare the gains obtained with the 2016 vacation rental in the 2017 income tax? The answer is, as a rule, yes. That is because the income tax is a way for the government to assess whether your patrimony profit is legal – it even monitors some transactions, which requires you to be very faithful to the information recorded at the time of the declaration.
But, to be more specific, we have listed below the three taxable ranges that are applicable to income tax for those who generate income from vacation rentals. If you answer “yes” to at least one of the situations, you must separate the calculator, a paper, a pen and open the notebook with the IRS system installed, which may vary depending on your performance in the segment. Look:
- Your property is valued at more than R$300 thousand (declaration);
- If you generate monthly rent income above R$1.903 (tax);
- If it generates annual rent income above R$28 thousand (taxation).
When it comes to income tax for season rentals, it is common for owners and managers of agencies and real estate companies to have questions related to the form of payment. At this step, we are putting in perspective the annual declaration (which, this year, ends on April 28) and the monthly declaration, which takes place through Carnê Leão – a specific program of the Brazillian IRS that opposes the cash book, for example, aimed at liberal professionals. Generally speaking, if you fit the second or third hypothesis listed above, you will have to choose monthly payment. It is also worth mentioning that, in this system, it is possible to record income and expenses (from each rent made, and not in a consolidated manner in the month) and, subsequently, check whether or not there is a tax to be paid, since the DARF (collection guide) is automatically generated.
It is known that the season rental operation involves costs that are sometimes high. After all, keeping a property in order and attractive in the face of growing competition is not necessarily cheap. In this sense, some owners question whether improvements made to a property rented for short periods can be deducted from the rental income when declaring income tax.
The answer for this case – which includes expenses with improvements that add direct value to the rented property, not to consumption – and the others below is yes. The only prerogative is to keep the invoices referring to all the amounts that you want to be deducted in order to prove them with the IRS. They are:
- Condominium fees;
- Business intermediation fees (may vary depending on the listing site);
- Taxes (“IPTU”, the Brazillian property taxes).
The income tax return for vacation rentals also varies depending on the nature of the people involved in the transaction. This process will be different if it happens between owner and guest when compared to that between real estate/vacation rental agency and company, for example. Thinking about these different contexts, we list the situations below with the help of accountant Luiz Paes, who is a managing partner at LCR Contabilidade and a specialist in services in the season rental. Check out:
Both situations account for owners of a property that makes the property directly available for season rental – without an agency or real estate agency, for example. In both cases, it is necessary to use the Carnê Leão system. When receiving from natural person, one must look for the specific field for filling in prices from the natural person.
Taxation is done in proportion to the amount received, following an official progressive table. See the table valid for income tax 2017, calendar year 2016:
Source: Brazillian IRS
In the case of a legal person, the lessee retains and sends the information to the owner, that is, the person who administers the income tax is not you. Then, you will add that income statement (usually sent between January and February) to your annual income tax return. For this reason, it is worth the alert: inform your guest about the need for him to declare the information, equally to you. If either party fails, you can both go through income tax inspection.
Legal entities, which manage companies focused on vacation rentals, may also have to declare income tax. In this case, the lessors are the administrators, the agency or the real estate agency. These professionals, in turn, only pay tax on the commission they receive from the owner from whom they rent the properties – an amount that must be specified in an invoice to be issued by the administrator to the owner.
Here, the income tax return for vacation rentals is made annually using a specific model called the Declaração de Informações sem Atividades Imobiliárias (DIMOB, meaning “Information Declaration without Real Estate Activities”), aimed at businesses with real estate. The legal person that rents declares that they have received commission and discriminates each rent with CPF (Brazil’s social security) or CNPJ (Brazil’s registered number) of the renter (in some cases, as in the case of foreigners, which do not have a CPF, it can be sent without this information).
Another liability in this situation is to pass all registered transactions to the owner, who will have to put everything in the natural person’s income tax system. So it is highly recommended that the administrator, even if they have a small business, have control of everything. Financial education at the beginning of activities is important because there is an obligation to pass on accurate information to the owner and also on behalf of DIMOB.
To assist in this control over information, a software aimed at the management of vacation rentals is also indicated, since this type of technology provides greater control over transactions and, of course, registration. In the ideal model, this system allows you to store the data and then export it directly to DIMOB, Carnê Leão or the Receitanet (Brazillian IRS’s system) itself.
There are also bookings made by legal entities. In this case, it is the lessee who withholds the tax.
Did you have any questions about income tax for vacation rentals? Do you have any suggestions? Write to us below in the comments!