Free online invoicing software
with KSeF support
Can you run a business in a house or apartment? What about business expenses and recognising them as tax-deductible costs? Rent, utilities, property tax and loan interest: can these also be deducted when operating in residential premises? What about VAT? We answer all these questions here!
Running a business at home — is it possible and why have a home office?
No provisions prohibit conducting business in a house or apartment.
It is therefore entirely legal and can be very advantageous, not only because no separate business premises need be rented or bought, but because some expenses relating to the residential property can be recognised as business costs. The related input VAT can also be deducted.
However, these savings and running the business at home require an appropriate legal title to the premises, such as a lease, free-use agreement or ownership document.
Depending on the business type, its characteristics or building rules, other conditions and special consent from the building manager, housing community or cooperative and notification of a change of use with no objection from the competent authority may also be required.
Accounting that understands your business
Leave your email address and receive guides supporting your business’s growth once a week
Costs of operating in your own house or apartment and tax-deductible expenses: rent, bills, property tax and part of loan interest
Returning to home business expenses, recognising them as tax-deductible costs is certainly possible.
They must meet general statutory requirements: be incurred to earn revenue or preserve or secure its source, and not be listed in Article 23 of the PIT Act, which provides numerous exclusions.
In practice, home business expenses that may qualify, at least partly, include:
- rent,
- utilities,
- internet and telecommunications, including telephone,
- furniture and equipment purchases,
- renovations, though expenditure increasing property value cannot be a tax-deductible cost!
- mortgage interest,
- property tax.
Recognising these expenses as business costs generally requires establishing the appropriate proportion attributable to the business-use part of the property.
This is usually based on floor area, determining which part is actually used professionally.
Deducting input VAT on home business expenses — the proportion and correctly issued invoices
When discussing home business expenses and savings, more must be said about VAT.
As noted, input VAT on expenses associated with business in a house or apartment can generally be deducted.
As with tax-deductible costs, a correctly determined proportion must be used, deducting VAT only for the part genuinely serving the business, not private purposes.
For many expenses, such as renovation or business furniture, proper documentation through correctly issued invoices is also very important.
If this article interested you, explore our tax advisory services and read how we can help you:
Summary
Running a business in a house or apartment? Here is what you should know about costs!
Running a business at home is entirely legal, and the vast majority of related expenses can be recognised as tax-deductible costs.
However, this generally requires determining the proportion actually attributable to the business conducted in the residential property.
The same applies to input VAT deduction, where proper documentation is also often very important.
Interested in this article?
Enter your email address and once a week you will receive practical materials and tips to help you grow your business.
Book a free consultation
Grow your business with accounting combined with advisory services:
or
