Hosting services - what are they and how can they be billed?
In times when access to the Internet is unlimited, in many cases it largely determines the functioning or keeping of the company on the market, incl. by acquiring new customers, commercial offers or searching for useful information. Hosting services, provided by professional entities specializing in serving Internet users, play a crucial role. Read the article below and get the answer to what web hosting services are and how to include them in your tax costs.
What are hosting services?
Hosting services are related to the creation of websites aimed at promoting and advertising your own business, and thus - they provide quick and generally accessible information. These services are one of the stages of setting up a company website, next to the purchase, registration of an internet domain and website positioning services.
It is worth noting that hosting is shaped by Art. 3531 of the Civil Code, according to which the parties concluding the contract may arrange the legal relationship at their discretion, as long as its content or purpose does not contradict the properties (nature) of the relationship, the law or the principles of social coexistence.
Hosting services include not only renting a specific area of servers, but also managing the server in terms of its connection to the Internet network.
Methods of recognizing costs and the purchase of hosting services
According to the Income Tax Act, and more specifically Art. 22 sec. 1 deductible costs are expenses incurred in order to achieve income, preserve or secure the source of income (with the exception of the expenditure referred to in article 1.23 of the Act where hosting services are not mentioned). So if your purchasing of hosting services is business related, your expenses could be your business costs.
Hosting services in most cases are invoiced on a yearly basis or for more than one tax year. Then, in such a situation, you should pay attention to the method of accounting for costs in the KPiR.
Methods of cost settlement The KPiR does not report anywhere, but is only used for accounting purposes. The selected method should be used by the entrepreneur consistently throughout the tax year.
Cash method for recognizing costs
If the entrepreneur uses the cash method of recognizing costs, then the expenditure incurred for hosting services should be recognized on the date it is incurred (the date of incurring the cost is generally the date of invoice).
The entrepreneur incurred an expense on hosting services that cover more than one tax year, and more specifically, they relate to the years 2017-2018. The invoice was issued on December 20, 2017. Additionally, it should be mentioned that it uses the cash-based method of recognizing costs. How should the expenditure be properly recorded in the KPiR?
If the cost is related to the business activity conducted by the taxpayer and the taxpayer applies the cash (simplified) method of recognizing costs in the KPiR, then the expenditure should be fully recognized on the date of issuing the document constituting the basis for accounting, e.g. invoice, i.e. in this case on December 20, 2017. .
The accrual method of recognizing costs and hosting services
In a situation where the taxpayer uses the accrual method of recognizing costs, hosting services that are classified as indirect costs should be included in proportion to the tax year to which they relate.
The entrepreneur purchased hosting services that cover the period from December 6, 2017 to December 6, 2018. The amount from the invoice issued on December 6, 2017 is PLN 2,500. How should the service be accounted for?
In this situation, the entrepreneur should divide the amount of the service:
[(2500: 365) * 26], which gives the amount of PLN 178.08, which can be included in costs in December 2017 and
[(2500: 365) * 339], which gives the amount of PLN 2,321.92, which should be recorded on January 1, 2018.
It happens that entrepreneurs purchase hosting services from foreign entities (eg Google). In this case, it should be noted that this is an import of services and art. 28b of the VAT Act. This means that the taxpayer is the buyer, and therefore the Polish entrepreneur is obliged to settle the VAT due on the sale (and not the standard seller).
Accounting for hosting services in the wFirma.pl program
In the case of active VAT payers using the cash method of accounting for costs in the KPiR, to book the expenditure incurred on hosting services, go to the EXPENDITURE tab »ADD» VAT INVOICE / INVOICE (WITHOUT VAT), and then select Other expenses related to business activity as the type of expenditure .
Then the expense will be posted to column 13 of the KPiR as Other expenses and the VAT purchase register.
However, in the case of active VAT payers using the accrual method of accounting for costs in the KPiR, go to the EXPENDITURE »ADD» VAT INVOICE / INVOICE (WITHOUT VAT) tab, and then select Other expenses related to business activity as the type of expenditure. You will also be able to select the RMK option (accruals).
By default, the system is marked with the cash method, so if the entrepreneur uses the accrual method, changes should be made in the SETTINGS »INCOME TAX» METHOD OF SETTLING COSTS.
After selecting the RMK option, fields will appear in which you must complete the expense dates (from-to). Based on the entered dates, the system will automatically divide the expenditure into applicable periods and will book the appropriate value of the expenditure to the KPiR in individual months (proportionally to the number of days in a given month).
In summary, hosting services are becoming more and more popular among entrepreneurs. The way they are posted is influenced by several factors described in the article.