Running a business in your own apartment - settlement of costs
Natural persons who have decided to run a business often decide to transfer a specific part of a private flat or house to the seat of their enterprise. For this purpose, they enter the premises into the register of fixed assets, and therefore have the right to partially include expenses related to its current use as tax deductible costs. However, it is important to separate costs into private costs and those incurred in the course of business, because only the latter can reduce the taxpayer's income.
The regulations do not explicitly regulate the issue of cost settlement in the scope of business activity conducted in the entrepreneur's private premises. This leads to many problems in understanding how to separate private and business costs. The most frequently used methods accepted by tax authorities are coefficients calculated on the basis of the percentage share of the area intended for running a business in the entire premises. However, it is not possible to use the factor in every situation. Another helpful solution are readings from meters or billing. In practice, however, proper documentation of expenses is of key importance due to the possibility of questioning the legitimacy of their incurring for the purposes of running a business.
Running a business in your own apartment and rent payments
In terms of expenses for the rent of an apartment also used in the tenant's business activities, the coefficient mentioned at the beginning will apply. It should be calculated as the quotient of the size of the room used for the company's needs and the entire flat area.
Example: An entrepreneur who owns a 100m2 apartment uses a 20m2 room in his business. The monthly rent for an apartment is PLN 550. Therefore, in order to calculate the value of the fee that may be classified as tax deductible costs, proceed as follows:
- percentage of the room: 20 m2 / 100 m2 = 20%,
- entrepreneur's cost: PLN 550 x 20% = PLN 110
Media costs and economic activity
Expenditure on utilities, i.e. electricity, waste disposal, water or sewage when running a business in your own apartment may also constitute a tax deductible cost. However, in this matter, it is also important to divide their amount between private and business consumption.
The previously used coefficient will not be applied in this case, because the entrepreneur uses some media in the course of his activity to a much lesser extent than the shown share. For example, the electricity needed for the operation of company equipment (computer, printer, etc.) will be much less used by them compared to household appliances, such as a washing machine or a refrigerator.
The solution may be the installation of additional meters that will allow an unambiguous reading of the use of a given medium for the needs of the enterprise or the preparation of a note explaining the logical method of cost accounting. The exact description is important mainly due to the possibility of questioning the expenses in tax deductible costs by the tax authorities.
Telephone and internet
Having a private telephone or internet in the apartment and using it in running a business, you should also pay attention to what part of the expenses is related to the conducted activity. In the case of a telephone, there are, for example, billings, on which the entrepreneur should indicate which connections belong to business calls. Importantly, the costs cannot be increased by a subscription paid for such a telephone, because it will be paid constantly regardless of whether it is used in business activities or not.
Similar cost accounting rules also apply to the private internet. However, if the taxpayer decides to conclude separate contracts for telecommunications and internet services used only for the purposes of the business, then the entire costs will be eligible for tax costs.
As you know, owning your own apartment often involves taking out a mortgage for its purchase. Then, if the entrepreneur enters a part of it into the register of fixed assets, he will be able to include paid or capitalized interest as tax deductible costs. To determine their value it is possible to use the aforementioned percentage.
Importantly, the interest paid before the flat is included in the fixed assets is not lost. This is because they can increase the initial value of the flat and hit the enterprise costs through depreciation.
In order for an entrepreneur to be able to count as tax deductible costs, depreciation write-offs from the initial value of a flat entered into fixed assets, it must meet the conditions set out in the Personal Income Tax Act, enabling it to be recognized as a fixed asset.
According to the definition of a fixed asset, it should be owned or jointly owned by the taxpayer, or be acquired or manufactured by the taxpayer on its own. Additionally, it must be complete and serviceable on the date it is entered into the records, with an estimated useful life of more than one year.
Expense records in the KPiR
Taxpayers who keep a tax ledger of revenues and expenditures who have introduced all or part of a private apartment to fixed assets should record the costs associated with it in column 13 - other expenses. According to the regulation on maintaining the KPiR, internal evidence is used to document expenses related to rent, electricity, telephone, water, gas and central heating. The basis for its preparation is a document covering all fees for these purposes, a copy of which should be attached to the proof.