As set out with respect to VAT (see hyperlink Rentals > VAT and CRL > VAT, rental charges may be treated in 2 different ways.
Thus, rental costs can be booked:
- Either as third-party items (disbursement mechanism): in this case, the reimbursement of such charges by the tenant will also be booked to third-party items: there is no impact on proceeds and charges, thus no effect on the profit or loss statement!
- Or to the profit or loss statement: to charges for those paid by the lessor and to proceeds for refunds made by the tenant: there is an impact on charges and proceeds: the double impact is ultimately neutral in terms of the result (except for smaller, indirect impacts, e.g. CVAE).
For vacant premises, charges are always booked as charges in order to reduce income (and if necessary generate a loss).
Focus // the problem of building works
There are 2 possible scenarios : financing of building works by the tenant or financing by the lessor.
³ Building works financed by the tenant
2 options are possible depending on the ownership of the works done by the tenant:
→If the lessor is the owner of the works, financing of the works by the tenant is seen as an addition to the rent that must be spread over the term of the lease (see hyperlink: Rentals > Profits tax > Rentals). In return the lessor, as the owner of the works, will write them down over the foreseeable duration of use, which may be different from the term of the lease (see hyperlink: Rentals > Profits tax > Main deductible charges > Write-down).
→If the owner of the works is the tenant, the operation will be neutral for the lessor. The tenant will book the appropriate item to its assets and write it down over its normal period of use (Article 39 D of the FTC), i.e. in practice:
³ Building works financed by the lessor
Here the solution is the opposite:
→ If the owner of the works is the lessor, it writes them down over the normal period of use, with no impact on the tenant.
→If the owner of the works is the tenant, this is seen for the owner as a reduction in the rent to be spread over the term of the lease (see hyperlink). For the tenant, the rent reduction should also be spread over the term of the lease; furthermore, the tenant will write down the amount of the works (he will write it down over the lease term or over the normal period of use if the latter is longer and if there is a reasonable expectancy of renewal of the lease).