According to the stricter approach, deposit can only be taken if the rented property is used as residential premises. A lessor can demand from the lessee a deposit in an amount of up to three months’ rent. The deposit of residential premises must be held in a credit institution separately from lessor’s own funds and at least at the local average interest rate. The interest earned belongs to the lessee and increases the deposit.

In case of commercial premises given on rent, the money paid by the lessee beforehand is considered a prepayment and a turnover for the lessor, therefore taxed with VAT. If the amount is repaid to the lessee after the contract has expired, the lessor can reduce its tax liability by submitting a credit invoice for the returned money.

According to the lenient approach, if the deposit of commercial premises is paid and held according to the rules of residential premises, i.e. in credit institution separately from its own funds, it is not considered as turnover from the moment of receipt.

These two different approaches have developed in the course of practice and are not specifically regulated by the law. Therefore, in case of confusion it is advisable to contact the tax authority for an official opinion to guarantee legal certainty.

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