PROCEDURE FOR THE RENT COLLECTION AND FISCAL LEGISLATION ABOUT UNPAID RENTS
Property management, which primarily involves leasing and rent collection, is an extremely challenging process, especially when you carefully select who will lease your property. For this reason, proper management should be carried out by specialized professionals in the field and not by friends or acquaintances who rush to help. Rent collection, the method, and the entire process that takes place to ensure that the tenant pays the rent and the landlord collects the rent on time, are crucial. The work of a property management company primarily involves finding a reliable tenant so that, as mentioned earlier, the landlord can collect the rent promptly after the tenant’s installation.
Beyond the standardized methods established for the proper and timely collection of rents, the personal interaction between the landlord and the tenant plays a crucial role, where the property management company takes the place of the landlord. However, οwners often have the misconception that they can handle the duties of a property manager themselves, believing they can replace an organized and specialized rent collection company. Things become challenging when achieving rent collection requires accommodating communication and, primarily, a conciliatory approach. Furthermore, matters escalate when the tenant proves to be difficult and unreliable. At this point, property management companies can intervene significantly, primarily by making strategic moves in advance to prevent reaching such a situation. However, if a period arises where rents cannot be collected, it is imperative to advise the landlords on the tax implications of uncollected rents.
Below we will mention what landlords need to know and what they need to do with uncollected rents in order to avoid taxation. They should be aware that uncollected rents are no longer transferred to the tax office for collection. With Law 4346 of 2015, another practical solution was established regarding uncollected rents. Specifically, uncollected rents will not be reported or included in the lessor’s total income. Uncollected rents will be declared under a separate code for uncollected income in the income tax return and will be taxed in the tax year they are collected.
However, to do this without the risk of losing tax revenue, a simple declaration by the taxpayer is not enough. There must be some form of court decision or at least legal action taken, proving the truth of the declaration of non-receipt of rents. This could be in the form of a payment order against the tenant, an order for rental payment, or a court decision for eviction or rent collection.
While this measure partially covers landlords by relieving them of the burden of paying tax on uncollected rents, it weakens the pressure on tenants and their fear of being evicted or having to pay the tax office for arrears. If the confirmed amounts are not paid to the tax office, professionals and individuals cannot obtain tax clearance or conduct transactions with the tax office. In any case, for landlords today, due to the economic situation prevailing in the country and the depreciation of properties, rent collection has become very difficult, and the exemption from tax on uncollected rents remains significant.