Building and Parking Management Fees Paid by the Lessee Should Be Treated as Rental Income
The Kaohsiung National Taxation Bureau clarified a case where an individual leased a property to a company. The lease agreement stipulated that the lessee would bear the building management fee and parking management fee. However, the lessee included these fees as part of the monthly rent when issuing the withholding tax certificate, leading the lessor to question whether this treatment was incorrect.
According to Ministry of Finance Taxation Directive No. 48 Tai-Cai-Shui-Fa-01035, any obligation performed by the lessee on behalf of the lessor or any expense paid by the lessee that should have been borne by the lessor is deemed consideration for the lease and is equivalent in nature to cash rent. Since building management fees form part of the condominium’s public fund and must be paid by the unit owner regardless of whether the property is leased, the lessee’s payment of building and parking management fees constitutes rental income to the lessor. Accordingly, such amounts must be included in the total payment base for withholding tax purposes.
The Bureau further noted that although these fees are treated as rental income, the lessor may claim them as deductible expenses when filing individual income tax, provided valid supporting documents are submitted. These expenses may be deducted along with land value tax, house tax, depreciation, insurance premiums, and other necessary costs. Alternatively, the lessor may choose to apply the standard deduction for necessary expenses as prescribed by the Ministry of Finance instead of itemizing each cost.
