Contributions to the renovation fund in the light of taxes

Service-Tax

As a rule, all income obtained by legal persons is taxable. However, the Corporate Income Tax Act provides for certain exceptions to the general rule and introduces exceptions to the above rule. One of such exemptions is the lack of taxation of income obtained from managing housing resources in the part intended for purposes related to the maintenance of these resources.One of the most common forms of receiving such income are payments to the renovation fund.

Payments to the renovation fund - general characteristics of the exemption

First of all, it is necessary to refer to the regulation of Art. 17 sec. 1 point 44 of the CIT Act, which describes the aforementioned exemption. Pursuant to this provision, the income of housing cooperatives, housing communities, social housing associations and local government organizational units operating in the field of housing management obtained from housing resources management is exempt - in part intended for purposes related to the maintenance of these resources, excluding income obtained from other activities economy than housing stock management. Consequently, in order for these taxpayers' income to be income tax free, two conditions must be met: this income must be obtained from the management of housing resources and intended for its maintenance. Both of these conditions must be met cumulatively. This is because income other than income from housing resources management, regardless of their purpose, and income from housing resources management in a part other than those allocated for the maintenance of these housing resources, are not exempt.

What is Housing Management?

Unfortunately, the Corporate Income Tax Act does not explain how to understand the concept of housing resources management, which in turn means that it is necessary to refer to the linguistic interpretation. This, in turn, indicates that the economy includes all mechanisms and conditions of operation of economic entities related to the conducted activity, and in relation to the exemption in question - with the housing stock management. Housing resource management is a set of activities aimed at meeting the expectations of residents, both economic and social.

So what is meant by the housing stock? Helpful in this matter may be the general interpretation of the Minister of Finance of March 5, 2008, No. with rooms belonging to them, as well as technical equipment, e.g. attics, basements, sheds, garages. It follows from the above that the housing stock includes not only residential premises, but also other rooms and devices, the existence of which is necessary for the proper use of the dwellings.

The broad understanding of the concept of housing resources is also confirmed by administrative courts in issued judgments. For example, in the judgment of the Provincial Administrative Court in Bydgoszcz of November 13, 2007, I SA / Bd 641/07, the concept of housing resources was defined as follows:

By the housing stock pursuant to Art. 17 sec. 1 point 44 of the Act of February 15, 1992 on corporate income tax, it should be understood not only residential premises, but also other rooms and devices that are part of a residential building or located outside it, the existence of which is necessary for the proper use of apartments by residents, as well as facilitating their access to the residential building and ensuring its efficient functioning and administration.

Another judgment of the Provincial Administrative Court in Szczecin of 11 March 2009, I SA / Sz 631/08, informs about the broad understanding of this concept:

Housing resources management includes the disposal and management of the accumulated residential premises (premises) to ensure the proper functioning of such dwellings. The housing stock managed by the Housing Community includes not only residential premises, but also other rooms and devices that are part of a residential building or located outside it, the existence of which is necessary for the proper use of apartments by residents, as well as facilitating their access. to a residential building and ensuring its efficient operation and administration. Income tax will apply to income obtained from activities other than housing management (e.g. from fees paid by owners of commercial premises), regardless of the purpose for which it is transferred.

Earmarking of income for the maintenance of housing stock

Another condition that must be met in order for contributions to the renovation fund to be tax-free is the need to allocate these contributions to the actual maintenance of housing resources. They are therefore targeted payments. Taxpayers wishing to take advantage of the exemption are required to separately determine the tax result on a given source, i.e. taxable income and conditionally exempt income from activity due to housing resources management.

The mere transfer of the revenue to the community repair fund is not sufficient for the income tax exemption to apply to it. Taxpayers benefiting from the exemption must, first of all, conduct activities in the field of housing, as this is the only reason for which there is a right to take advantage of the exemption in question.

Example 1.

The housing cooperative collects contributions from tenants to the renovation fund. The payments in question are allocated by the cooperative to the ongoing repairs of residential buildings. In this case, both statutory conditions have been met, which means that payments to the renovation fund constitute tax-free income.

Example 2.

The housing cooperative collects contributions from tenants to the renovation fund. However, the received payments were used for marketing and advertising of the cooperative. Consequently, such payments cannot be exempt from income tax and are treated as taxable income.

The allocation of this income is also important for the dismissal. It must be directed towards the maintenance of this housing stock. In the judgment of the Provincial Administrative Court in Poznań of 30.01.2009, I SA / Po 1421/08, we read on this subject:

"1. The term housing stock is the definition of a set of apartments and other rooms and devices that are necessary for the proper use of apartments in a residential building. The "economy" is the disposition and management of something. The rent from the lease of residential premises is the income obtained from the housing stock management.

2. The rent earmarked for the repayment of the loan used for the construction of residential premises does not serve to maintain the housing stock, because the loan was taken out for the construction of residential buildings and not for their renovation ”.

On the other hand, income from business activities that are not the core activities of housing cooperatives is subject to taxation. Such activities include: rental of advertising space on buildings, as well as places on roofs for satellite antennas and mobile telephony, and rental of commercial premises.

Therefore, it should be stated that the income earned by the housing association and transferred to the renovation fund is taken into account by the community in the tax settlement in each case where it comes from activities other than housing resources management. Otherwise, such income benefits from tax exemption under Art. 17 sec. 1 point 44 CIT and is not included in the tax base.