Munich landlord ordered to pay 40,000 euros in tax due to low rents

A Munich landlord, Thaddäus Spegel, has been ordered by the tax office to pay over 40,000 euros following a 2022 tax audit. The demand stems from Spegel intentionally keeping rental prices significantly below local market levels for his more than 100 apartments.

In one instance, a 61.28 square meter apartment was rented for 540 euros per month (8.80 euros per square meter), while the tax office determined the local market rent to be 1,236.17 euros (20.17 euros per square meter). Because the rents were so low, the tax office reduced the landlord's deductible advertising expenses and, in cases where tenants were also employees, applied taxes for non-cash benefits.

German tax regulations dictate that if rent is below 50 percent of the local market rate, the landlord can only claim a portion of advertising expenses, such as depreciation, interest, and maintenance. If rent is between 50 and 66 percent, the full deduction depends on a forecast of long-term surplus. Rents at 66 percent or higher are generally treated as fully compensated for tax purposes.