How to keep accounting records for a rented apartment?

Accounting is of key importance for both individuals and entrepreneurs who rent out an apartment. This process ensures transparency and legality of the calculation of rent and tax accounting in general. The relevance of such accounting is due to several factors: the need to declare income (including from renting out an apartment); reducing potential financial risks. Below we will examine this issue in more detail.

Apartment for rent: tax accounting of income and expenses of the landlord

For entrepreneurs who pay income tax, accounting for rental transactions is quite simple, in particular due to the absence of tax differences. This means that the financial result from calculating the rent and deductions is not adjusted for any special indicators, and therefore it is worth using general accounting rules. However, it is worth considering that if the tenant reimburses utilities to the lessor-individual, then these amounts will not include VAT for the tenant. In this case, rental expenses will be reflected according to standard rules: simultaneously with a decrease in assets or an increase in liabilities.

Finally, the rent is subject to VAT at a rate of 20%, since it is essentially a supply of services. However, if the lessor is an individual or entrepreneur without VAT status, then:

• VAT is not charged on the amount of the rent;
• the amount of rental payments is taken into account when determining the need for registration as a VAT payer.

Accounting for a rented apartment: main features and accounting entries

From the point of view of accounting, a rented apartment belongs to non-current assets. They are credited to the off-balance sheet account 01 “Lease non-current assets” at the cost specified in the lease agreement. Accordingly, depreciation is not charged.

To properly reflect the costs of renting an apartment in accounting, it is always necessary to have a primary document drawn up in accordance with current national legislation - a lease agreement (for an individual) or an act of providing services to such an agreement (for a legal entity).

Depending on the purposes of using the apartment, the rent is debited to the relevant accounts, in particular:

• Dt 23 “Production”;
• Dt 92 “Administrative expenses”;
• Dt 94 “Other operating expenses”, etc.

A separate situation arises when it comes to paying rent in advance. Such expenses should be reflected in account 39 “Prepaid expenses”, and then written off to the expenses of the enterprise in the relevant periods. The amount of compensation payments (for utilities) is attributed to expenses in the same order as rental payments. In more detail, we will give the main accounting entries for reflecting payments for renting an apartment:

• Accrual of rent - Dt 2117 and Kt 7411;
• Accrual of VAT obligations - Dt 7411 and Kt 6311;
• Payment of rent - Dt 8013 and Kt 6211.

Renting an apartment to an individual entrepreneur on a simplified system

It is worth noting: not all individual entrepreneurs who are subject to a single tax can rent out real estate. In particular, only individual entrepreneurs of groups 2 and 3 have such a right so far, provided that they are registered under KVED 68.20. The Tax Code of Ukraine establishes certain restrictions for renting out apartments by these individual entrepreneurs, which consist of:

• first, limiting the area of ​​real estate permitted for rent to 400 sq. meters;
• second, submitting a completed form No. 20-OPP to the State Tax Service;
• third, the obligation to use the RRO/PRRO when paying the rent to him in cash or by card (exception - if the payment is made using bank details).

How can an accountant from Prikhodko & Partners LLC help you?

Accounting consulting

Within the framework of consulting, our specialists will provide you with professional advice and assistance in resolving particularly complex issues related to accounting for apartment rentals. Within the framework of accounting consulting, the specialist will:

• explain the features of taxation of rental income for individuals and entrepreneurs;
• advise on the requirements for a lease agreement, acts of services rendered and the procedure for their storage;
• explain how to correctly reflect payments and expenses for apartment rentals in accounting statements (using modern postings);
• explain how to correctly make calculations for rent;
• help you understand the nuances of paying real estate tax.

Accounting outsourcing

If you do not want to delve into the intricacies of accounting yourself, our accountants can take on the full management of these complex operations. As part of the full accounting support service, our specialists will be able to:

• prepare the necessary primary documents;
• ensure the correct reflection of all income from the lease and related expenses in accounting and tax accounting;
• timely and correctly prepare all necessary tax reports, submit them through the Taxpayer's Electronic Cabinet to the relevant State Tax Service authorities;
• carefully monitor compliance with restrictions for individual entrepreneurs on the simplified system, etc.

Get reliable support in accounting for apartment rentals from the specialists of the Law Firm “Prikhodko & Partners” today. To find out the cost of accountant services, fill out the form below.