Changed VAT rules for service charges on property rentals: what landlords and tenants need to know

Since Jan. 1, 2025, new VAT rules apply to service charges charged by landlords when leasing residential and commercial properties. This change can affect both new and current leases. What exactly is changing and what should you be aware of?

What was the situation before 2025?

Until the end of 2024, a distinction was made between residential and commercial properties:

• For residential rentals: service charges were in principle exempt from VAT.
• With commercial real estate: landlords generally did have to charge VAT (9% or 21%), especially if it involved independent services in addition to the rent.

The new VAT rules since January 1, 2025

The gist of the change: whether service charges are subject to VAT now depends primarily on the degree of independence of the service.

1. Independent service = VAT liable

A service is considered an independent service (and therefore subject to VAT) if:

• The tenant is free to choose the supplier of the service;
• Or the tenant decides how much of the service to purchase.
• Examples of service charges subject to VAT:
• Supply of heat and cold via an individually metered system (such as CHP);
• Individual billing of gas, water or electricity based on own consumption;
• Cleaning of common areas, if tenants themselves or together choose the service provider.

2. Ancillary service = follows VAT regime of the rental

If the service is closely related to the rental and the tenant has no influence on use or supplier, then:

• Is the rental subject to VAT? Then so are the service charges.
• Is the rental exempt from VAT? Then so is the service charge.

Examples:

• A cleaning service whose provider is fixed;
• Repairs or dirt removal that are included as standard in the rental;
• A glass insurance policy through the landlord.

Practical examples: where is the impact?

For residential property

• Previously exempt, now subject to VAT: utilities such as gas, water and electricity – if consumption is measured and billed per dwelling.

For business premises

• Previously subject to VAT, now possibly exempt: if an all-in price is charged without individual measurement of consumption.
• Previously exempt, now subject to VAT: if tenants can choose their own suppliers, for example for cleaning or security.

What does this mean for current rental agreements?

Step 1: take stock of what services have been agreed upon

• No service charges? Then there is nothing wrong.
• Are there service costs? Check whether these are paid individually or can be influenced by the tenant.

Step 2: determine the VAT status per service item

Step 3: what if VAT is still charged now?

If the landlord suddenly charges VAT on service costs that were previously exempt, this can be financially detrimental to the tenant – especially if they cannot set off the VAT. The lease agreement can provide guidance here:

•  “Including taxes and duties”: the tenant can argue that additional VAT should not be passed on.
• “Excluding VAT”: the landlord is probably allowed to pass on the VAT.

Beware of ROZ models for business premises

The commonly used ROZ models do contain provisions on VAT on the rent, but not on VAT on service costs. If legislation changes, these models may therefore offer insufficient protection for landlords who are currently losing income.

Conclusion: take a close look at your lease

The change in VAT rules as of 2025 is more than a tax formality. It can have direct financial consequences for both landlords and tenants. Therefore, make sure that:

• You have your lease properly reviewed;
• Your service charges are clearly itemized;
• You know whether you can deduct VAT or not.

Advice

Do you have questions about the above developments or do you have other legal questions about tenancy law? Our specialized lawyers will be happy to assist you.