Rental agreements within the family are only recognised for tax purposes under specific conditions.
In a recent ruling, the Federal Finance Court (BFG) clarifies the conditions that must be met for property lettings within the family to be recognised for tax purposes.
Citing the established case law of the Administrative Court (VwGH), the BFG held that agreements between close relatives are only recognised for tax purposes if the following conditions are met:
- The agreement must be sufficiently evident to third parties,
- its terms must be unambiguous, clear and leave no room for doubt,
- it would have been concluded between unrelated third parties on the same terms.
- Furthermore, the actual performance of the contract must be in accordance with the aforementioned conditions.
Tip:
Agreements within the family must be on arm’s length terms in order to be recognised for tax purposes. It is often difficult to assess whether terms are on arm’s length terms. It is therefore advisable to consult us before entering into any such agreement, in order to minimise potential risks.