The first choice for a place of business activity is usually the entrepreneur’s apartment. This has its advantages, but you cannot forget about tax issues. Check what the regulations say about a home-based business.
How does a home business affect taxes?
Expenses related to the premises in which the company has its registered office can be included in tax-deductible costs. However, this does not mean that changing an apartment into an office will allow you to include all expenses related to maintaining the apartment in business costs every time. In this case, the facts are important.
If the entire premises are used only for business purposes, then all expenses incurred can be deducted. But if only part of the apartment is used to run the business, the costs must be calculated in proportion to the usable area intended for running the business.
At the same time, it is important to avoid embellishing reality. In the event of an audit, the tax office can easily conclude that the premises are also used for residential purposes, and in this case not all expenses on the premises can be qualified as business expenses.
Home business activity and property tax
The use of a residential unit for business activity is associated with a higher property tax. This will apply to the parts used for business purposes. Therefore, it is worth determining exactly in which parts of the apartment the business is conducted. It is a common practice to allocate one room for all activities related to running a business. In this situation, the higher tax will apply only to this room according to its usable area.
In the case of separating one room in an apartment for running a business, the increased property tax paid for this room can be included in the business costs. Rent can also be included in tax-deductible costs, but only to the extent that it concerns the premises intended for running a business. The easiest way is to use the proportion of the area of this room in relation to the area of the entire apartment.
Maximum tax rate for a business in a residential unit
Property tax rates are determined by municipalities. However, they cannot do it in any way. As a rule, the tax on real estate intended for residential purposes is one of the lowest. The situation is different with the tax rate on premises intended for business activity. In this case, the amount of the tax is at the other extreme of property tax rates.
The maximum tax rates are set out in the Announcement of the Minister of Finance on the upper limits of the amount rates of local taxes and fees. The maximum tax rate for residential real estate is PLN 1 per m2. On the other hand, real estate used for business activity may be taxed at a maximum level of PLN 28.78 per m2.
