The purpose of a deposit is to offer the lessor security against malicious lessees. The deposit should discipline both parties to the transaction. However, the taxation of deposits often leads to confusion. The tax authority has also given different answers to different queries. Some of its answers are stricter than others. In some cases it has demanded that the money be kept in a credit institution, in others it has found that keeping the money separate from the taxable person’s funds is enough. Basically, there are two opinions. One of them is strict, the other more lenient.

According to the first approach, a deposit can only be taken in the case of residential premises and deposits for commercial premises always constitute prepayments and turnover. This statement is supported by the fact that pursuant to § 308 of the Law of Obligations Act, a lessor can demand a deposit in an amount of up to three months' rent from the lessee only in the case of a residential lease contract. Also, the lessor must keep the deposit in a credit institution separately from their own assets and at least at the local average interest rate. The interest belongs to the lessee and increases the deposit. If these conditions have been met, the deposit received from the lessee is not considered the receipt of a prepayment and it is not declared as tax-exempt turnover in the tax return (considering that giving residential premises on rent can only generate tax-exempt turnover for the taxable person).


When commercial premises are given on rent, the amount paid as deposit must be regarded as a prepayment for the rental service and taxed with VAT in the case of voluntary taxation of the rental service. If the amount regarded as deposit is repaid to the lessee after the expiry of the contract, the lessor can reduce its tax liability by submitting a credit invoice for the repaid amount. Basically, the deposit paid for the rental of commercial premises must always be regarded as a prepayment and turnover.

The somewhat more lenient opinion of the tax authority is that if the deposit for a commercial lease contract is paid and held in the same way that a deposit for a residential lease contract is paid and held according to § 308 of the Law of Obligations Act, the deposit paid on the basis of a commercial lease contract is not regarded as a prepayment for the requested service and it does not generate turnover from the moment of receipt. The important aspect is that the lessor keeps the amount regarded as a deposit separately from its own funds.

The above opinions of the tax authority have developed in the course of practice and they are not specifically regulated by law. The taxation of the deposits for commercial premises still depends largely on the lease contract as well as how and whether or not the received deposit is recognised and/or held separately from other assets. In order to mitigate possible tax risks, we advise you to send an official query to the tax authority, describing the specific circumstances and asking for an official opinion to guarantee legal certainty.