According to the latest interpretation of the Director of KIS, indirect costs associated with the maintenance and operation of a private dwelling may be included in the cost of obtaining revenue: administrative rent, electricity, internet and water and central heating, as well as part of the interest on private housing credit and depreciation of part of the premises. How does that work in practice?
A flat for the purpose of doing business can be included in the KUP, to a certain extent
The interpretation referred to the taxpayer's question, which is a math teacher, and in a private apartment he wants to tutor. The applicant at the date of submission of this application shall be the owner of the property in which he resides, purchased with a mortgage loan that he pays as a private person. He wants to use the study, hall and kitchen in which he wants to prepare snacks for his students. As part of an apartment intended for activity, it also lists a toilet.
The Director of KIS considered that, in the case of the use in the business of a residential establishment, it should be stated that there is a causal link between the expenditure involved in its use and exploitation and the activity carried out. This expenditure may therefore, in principle, constitute the cost of obtaining revenue.
However, it should be pointed out that expenditure relating to the use and operation of a dwelling may be the cost of obtaining income in the business activity only to the extent that the above-mentioned premises are used for the purposes of that activity.
At the same time, it should be stressed that the provisions of the Income Tax Act on individuals do not make the possibility of including such expenses into the costs of obtaining revenue on the basis of separation, in the literal (physical) sense, of the premises where business is carried out.
The taxpayer should determine what part of the housing unit actually serves his business activity, and can then, in an appropriate share and in an appropriate proportion, charge the expenditure incurred for tax costs.
Apartment used in business as a permanent medium
Expenditure on acquisition, production and improvement of fixed assets and intangible assets shall not be included in the cost of obtaining revenue once.
Content Article 23(1)(1) It follows from the abovementioned Act that it is not considered to be the cost of obtaining revenue for expenditure on:
- the acquisition of land or land use rights, except for land use charges,
- the acquisition or production in its own right other than those referred to in point (a) of fixed assets and intangible assets, including those forming part of the acquired undertaking or parts thereof,
- improvement of fixed assets according to Article 22g(17) increase the value of fixed assets on which depreciation is calculated
‒ This appropriation is intended to cover the following expenditure: Article 22h(1)(1), are, however, at the expense of obtaining revenue in determining the income from the sale of goods specified in Article 10(1)(8) point (d), and where the disposal of things and rights for consideration is the subject of business activity, and in the case of the disposal of assets related to the economic activity referred to in Article 14(2)(1), No matter when they're carried away.
According to Article 22(8) Laws: At the expense of obtaining revenue are write-downs on the consumption of fixed assets and intangible assets (amortisation write-downs) made exclusively in accordance with Article 22a-22o, including Article 23.
According to Article 22a(1) Personal Income Tax Act: depreciation is subject, subject to Article 22c, owned or jointly owned by the taxable person, acquired or produced in his own right, complete and fit for use on the date of acceptance for use:
- buildings, buildings and premises owned separately,
- machinery, equipment and means of transport,
- other items
‒ of an estimated period of use of more than one year, used by the taxable person for purposes related to his business activity or put into use under a lease, lease or contract as defined in Article 23a(1), called durables.
According to Article 22c(2) Personal income tax laws: amortisation shall not be subject to residential buildings, including their lifts or dwellings, for the purpose of carrying out business or leased or rented under contract, unless the taxpayer decides to depreciate them, hereinafter referred to as fixed assets or intangible assets, respectively.
Accordingly, fixed assets are amortised under the following conditions:
- have been acquired or produced on their own account,
- are the property or joint ownership of the taxpayer,
- are complete and fit for use on the day of acceptance for use,
- the estimated period of use is more than one year (the decision in this respect is the taxable person's responsibility),
- are used by the taxable person for the purposes of his economic activity or for use under a lease, lease or lease agreement,
- are not listed in the fixed assets catalogue listed in Article 22c the abovementioned Act.
State Article 22d(2) Personal income tax laws: assets referred to in Article 22a-22c, excluding ingredients listed in section 1, entered in the accounts of fixed assets and intangible assets in accordance with Article 22n, at the latest in the month of transmission for use. A later date of introduction shall be deemed to reveal the fixed asset or intangible asset referred to in Article 22h(1)(4).
According to Article 22f(4) Personal Income Tax Act: if only a part of the property, including a residential building or a residential dwelling, is used for business activity or rent or lease of depreciation write-offs, the amount determined from the initial value of the property, building or premises corresponding to the ratio of the usable area used for business activity, rented or leased, to the total usable area of that property, building or premises.
According to Article 22i(1) Act referred to above: depreciation off fixed assets, subject to Article 22j-22l, the depreciation rates set out in the list of depreciation rates and rules referred to in Article 22h(1)(1).
When classifying fixed assets into individual groups, the Classification of Fixed Measures should be used. In accordance with the Regulation of the Council of Ministers of 3 October 2016 on the Classification of Permanent Measures (Journal of Laws of 2016, item 1864), The classification of Persistent Measures is a structured set of fixed assets that serve, among others, for the purposes of registration, the determination of depreciation rates and statistical surveys.
It should be noted that it is for the taxpayer to make the correct classification of the fixed asset into the relevant CST group. If it is difficult to determine the correct grouping of the asset, the entity concerned may request an indication of the symbol (group) of the fixed asset and an opinion to the Statistical Office.
In view of the future event described by the taxpayer and the tax legislation cited, it must be stated that if the apartment is a permanent measure, the expenditure for the purchase of this permanent measure must be borne in accordance with Article 23(1) The Income Tax Act on individuals must not directly constitute the cost of obtaining income. The cost of obtaining revenue will be depreciation written down according to Article 22a-22o the abovementioned law Ö from the initial value of this permanent measure.
Depreciation write-downs shall be made from the moment the fixed asset is included in the fixed assets and intangible assets records. At the same time, depreciation write-offs can be the cost of obtaining revenue in the proportion in which the area used for business activity remains to the entire area of the apartment.
Interest on credit drawn to finance the acquisition of real estate as a CUP in the business
As regards the calculation of the cost of obtaining interest on the loan to finance the acquisition of the property, which is part of the business, it should be pointed out that according to Article 23(1)(8) point (a) of the Personal Income Tax Act, shall not be considered as costs of obtaining revenue from expenditure on repayment of loans (credits), except for capitalised interest on those loans (credits), except that the cost of obtaining income is that of repaying the loan (credit) where the loan (credit) has been valued at a foreign currency rate where:
the borrower (the borrower) in connection with the repayment of the loan (the loan) returns the amount of capital greater than the amount of the loan (the loan) received Ö in the amount of the difference between the return on capital and the amount of the loan (the loan) received,
the lender (the lender) receives cash to repay the capital below the amount of the loan (the loan) is equal to the difference between the amount of the loan (the loan) and the amount of the capital repaid.
At the same time, it shall not be considered as revenue costs:
- accrued but unpaid interest on liabilities, including loans (credits) Article 23(1)(32) the abovementioned Act on Income Tax on Individuals,
- interest, commissions and exchange rate differences on loans (credits) increasing investment costs during the period during which these investments are implemented Article 23(1)(33) the abovementioned Act.
In the light Article 23(1)(32) The income tax laws on individuals should be considered as having only paid interest gives them an opportunity to be credited with revenue costs.
Consequently, it must be concluded that interest is at the expense of the following conditions:
- are actually paid,
- they are due to a causal link with revenue,
- do not increase investment costs during the period during which these investments are implemented.
It follows from the above that, in order to properly settle the costs of obtaining revenue, it is important that the taxpayer incurs the expenses associated with the payment of interest on credit.
Therefore, in view of the future event and the legal provisions laid down, it should be stated that since the residential premises in question, which the applicant is the owner of, will in part be used by the applicant in the economic activity carried out by the applicant, the interest paid after the date on which the apartment was put into service Ö on the loan contracted for its acquisition in proportion to the area used in the business activity may constitute the cost of obtaining income from that activity.
In conclusion, at the expense of obtaining income, in proportion as the area of the apartment used for business activity to the entire area of the apartment may be:
- expenditure on administrative rent, electricity, internet and water and central heating,
- depreciation off from the initial value of the property,
- interest paid on mortgage payments to finance the purchase of the property.
Individual interpretation with 25 September 2020, The signature. 0112-KDIL2-2.4011.535.2020.1.IM - Director of National Tax Information