The Law of Contracts and Torts regulates a lease agreement as a specific type of contract whereby the lessor undertakes to transfer possession of the property to the tenant for use, who is in turn responsible for paying the negotiated rent.

A lease agreement may be established between a legal business entity and a natural person who owns the property. The following post will discuss the lease of a property from a natural person and the relevant tax burdens.

Real estate lease agreements must be done in writing since they will serve as the basis for accounting purposes for the tenant in the absence of an invoice. Unlike contracts for real estate sales, a lease agreement is not notarized by a court or municipality.

Payment for a lease can be negotiated in foreign currency, but payment must be made in dinars in the counter value of the foreign currency (currency clause). In some cases, the Law on Foreign Exchange Operations allows for the payment of rentals in foreign currency (Article 34, paragraph 2, section 5).

The Law of Contracts and Torts regulates the interpersonal rights and obligations of the contracting parties. Among the issues that frequently arise between tenants and lessors is the responsibility for maintenance costs. The law clearly states that the lessee is responsible for ongoing expenses and only small repairs deemed necessary, while any major repairs must be carried out by the lessor.

A legal business entity may also rent a property from a natural person who is the entity’s founder or member and establish a leasing contract with said person.

A legal business entity who is the leaseholder of a property owned by a natural person is responsible for calculating and paying taxes on leasing and rental income. According to new amendments which went into effect on May 30, 2013, the income of natural persons, which is the product of real estate leasing, falls into this category.

Take a look at the method for calculating taxes on property leasing:

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