How to deduct VAT on utility expenses when operating in your own apartment
Do you run business in your own home or apartment? Remember that you need to keep private expenses separate from business expenses. Because only company expenses will be tax-deductible. Find out how to deduct VAT on utilities in such a situation.
Notification of activities carried out in your own apartment
An entrepreneur who wants to run a business in his own apartment should report this fact to the competent commune or city office. This may require you to pay a higher property tax. This address should also be included in the CEIDG-1 form (used for business registration).
It should be remembered that the taxpayer does not have to use the entire apartment for the purposes of his business. If the entrepreneur allocates only part of the premises for the place of his business, all costs will be calculated based on the share of the area of the part intended for business activity in the overall size of the house.
The taxpayer runs a business in an apartment with a total area of 100 m2. For the purposes of the business, the entrepreneur has allocated one room - a room with an area of 25 m2. What will be the ratio on the basis of which the entrepreneur will determine the value of the tax deductible cost?
(25 m2: 100 m2) x 100% = 25%
Taxpayers exempt from VAT take into account the gross amount from the invoice, which they then multiply by the calculated factor. For active VAT payers, the net amount from the invoice is of key importance.
It should be remembered that the above coefficient cannot be used in all cases. Depending on what costs will be deducted, you can refer to readings from meters or billing.
Economic activity in an apartment, rent and heating plant fees
Expenses for rent may be tax-deductible. To calculate the base, the share factor is used. At the same time, it is worth bearing in mind that if there is no possibility of separating the space in the apartment solely for the purposes of the conducted activity, the right to include the expense in costs may be lost. According to the interpretation of the Director of the Tax Chamber in Katowice of June 25, 2012, in a situation where all rooms have residential functions, private and business expenses cannot be separated. Therefore, even a part of them cannot constitute a tax cost.
VAT and bills for electricity, water, sewage, garbage, gas
In the case of utility bills, the use of the usage ratio is unjustified. After all, an entrepreneur may consume much more electricity in his activities than it could result from the proportional use of the premises. Two solutions can be used to determine the amount of utilities expenses:
installing separate meters,
using a self-determined proportion, which should define as precisely as possible the actual use of electricity for purposes related to own business activity (determining the appropriate values is at the discretion of the taxpayer).
Including housing expenses in the costs of business activities requires the preparation of additional documentation - the so-called internal evidence.
VAT and telephone and internet bills
The easiest way is when you have a company phone. A monthly invoice for the company is the basis for a full VAT deduction.
Doubts arise when it comes to a combined subscription. In this case, the taxpayer may refer to billing. The entrepreneur should indicate which of the connections were made for purposes related to business activity. Importantly - the cost of a private telephone subscription cannot be counted as tax deductible costs.
In the case of internet charges, you can do the same as in the case of telephone bills or set up a separate link for the company - then it is possible to fully deduct VAT and include the expense in costs. In the case of a shared link, an estimate of the percentage consumption for business purposes should be made.
Interest on a private mortgage loan for the purchase of an apartment and business activity in an apartment
In a situation where the entrepreneur runs a business in his apartment for the purchase of which he took a mortgage, the interest on the loan may be counted as tax deductible costs. However, it should be remembered that he is only entitled to use interest that has been paid or capitalized. Moreover, in a situation where a business owner decides to introduce a private apartment for the company's fixed assets, the interest accrued until the day the apartment is handed over to business increases the initial value of the fixed asset. Additionally, they constitute tax deductible costs through depreciation write-offs.
Own activity in the apartment - NIP of the buyer
In the case of running a business at home, it happens that the issued invoice does not contain the buyer's NIP. In this case, in order to be able to deduct VAT from utility expenses, the taxpayer should ask the supplier to issue a corrective invoice with the NIP number included.
Own activity in an apartment - VAT - documenting
VAT deduction - partial or full - requires a purchase invoice clearly indicating the taxpayer as the buyer of the service. In the context of a sole proprietorship, the invoice should include:
the date of its issue;
a sequence number within one or more series that uniquely identifies the invoice;
the first and last names or names of the taxpayer and the buyer of the goods or services and their addresses;
the number by which the taxpayer is identified for tax purposes;
the number by which the buyer of goods or services is identified for the purposes of tax or value added tax under which he received the goods or services;
the date on which the delivery of the goods or the service was completed or completed or the date of receipt of payment, if such a date is specified and differs from the invoice issue date;
name (type) of goods or services;
measure and quantity (number) of delivered goods or scope of services provided;
unit price of a good or service without the tax amount (net unit price);
the amount of any price rebates or reductions, including in the form of an early payment rebate, provided that they are not included in the net unit price;
value of the goods delivered or services performed, covered by the transaction, excluding the tax amount (net sales value);
the sum of the net sales value, broken down into sales subject to individual tax rates and sales exempt from tax;
the amount of tax on the sum of the net sales value, broken down into amounts related to individual tax rates;
the total amount due.
The invoice can be made both in hard copy and in electronic form.
Accounting for expenses related to the use of the apartment
Costs related to the use of a flat for business purposes should be included in col. 13. KPiR “other expenses”. As already mentioned, the entrepreneur can prepare internal evidence specifying the amount of expenses. The basis for drawing up this proof is a document covering all fees for these purposes, i.e. a VAT invoice issued to the taxpayer. It is worth attaching to the internal document an explanation of how the calculations were carried out.
When deducting the costs of using a private apartment for business purposes, every effort should be made to make the calculations as accurate as possible. In the event of a tax audit, the taxpayer will have to convince officials that his calculations are correct. It should be remembered that overstating the costs of running a business may result in penal and fiscal liability.