However, this can lead to discussions with the VAT authorities in case that the landlord and the tenant are closely related parties and the tenant does not have a full right to deduct input VAT. In that case, a minimum taxable base equalling the “normal value” has been introduced. However, in our point of view, the current specific circumstances can be taken into consideration when determining the “normal value” of the rent.
If you have already issued an invoice for the payment of the rent, the VAT that is charged on this invoice has become due. In case you agreed to suspend the rent payments after the issuance of the invoice, this invoice can be credited and a refund of this VAT can be requested in the periodical VAT returns.
In principle, a temporary suspension of rent payments should not affect your VAT position as a landlord meaning that this would not require a correction of the right to deduct input VAT. However, you should be vigilant for a VAT correction on the deduction side if it becomes clear that the rent will be terminated (e.g. because the tenant would fail). In the latter case, such a correction can be avoided if sufficient effort is made to find a new tenant as soon as possible. It is important to document all these efforts (e.g. publicity,…).
Finally, the situation is different in the case of an immovable leasing subject to VAT. In the event of a suspension/remission/reduction of the lease payments, you need to ensure that the conditions for the application of VAT are still met, in particular the obligation to reconstitute the invested capital within the revision period of 15 years.
If you have any questions on this subject, please contact the authors of this article.