An important element that affects the profitability of an investment in real estate for a company is the possibility of including its value in the costs of obtaining income and recovering VAT. What options does an entrepreneur have once he buys a premises or a building and enters it in the register of fixed assets of his company ? How much are depreciation deductions? When can VAT be deducted? Check out the guide below.
Purchase of real estate for a company: depreciation deductions
Structures, buildings and premises that are separately owned are - in accordance with Art. 22a of the Act of July 26, 1991 on personal income tax - fixed assets with an expected period of use longer than one year, which are subject to depreciation . In order to make depreciation write-offs, it is necessary to enter them in the register of fixed assets . Depreciation takes place from the first month following the month in which the asset or value was entered into the register.
Write-offs are linear using the rate from the list of depreciation rates, which are :
- 2.5% of the initial value for buildings and non-residential premises,
- 1.5% of the initial value for buildings and residential premises,
- It is also possible to set an individual rate when the asset meets the definition of a used asset and is entered into the taxpayer's records for the first time.
Depreciation deductions should be continued until their total amount reaches the initial value of the building or premises or until the assets are sold or liquidated.
Purchase of real estate for a company and VAT
To the extent that goods and services are used to perform taxable activities, the taxpayer has the right to reduce the amount of tax due by the amount of input tax (Article 86.1 of the Act of 11 March 2004 on tax on goods and services). This means that when purchasing real estate for business purposes, you can deduct VAT .
VAT and PCC – differences
First of all, you need to take into account who you are buying the property from:
- VAT is part of the price of real estate purchased from a developer or other entrepreneur. For premises and buildings with an area of 150 m 2 it is 8%. For properties with a larger area, the VAT rate increases to 23%;
- if the real estate is purchased from a private person under a civil law contract (usually this applies to real estate from the secondary market ) , the PCC tax must be paid, the amount of which is 2 % of the price of the real estate recorded in the notarial deed. If the purchase is related to business activity, the PCC tax - similarly to VAT - can be included in tax costs ;
When VAT can be deducted and when not
The second issue is how the property will be used . It affects tax deductions:
- if the apartment was purchased for residential purposes , the VAT paid upon purchase cannot be deducted;
- if the apartment is used for short-term rental and meets the criteria for taxable activity, VAT can be deducted from tax. The same applies to the purchase of commercial real estate .
What else should you pay attention to when buying real estate for your company ?
In addition to depreciation and VAT, settling the company's income tax is also important in the context of purchasing real estate for a company. Costs related to the operation and maintenance of real estate, e.g. incurred for renovations, repairs or management costs, may be included in tax deductible costs , which will reduce the tax base.
If you run a small business, even a sole proprietorship, it is worth considering purchasing a commercial and residential building . It makes it possible to combine residential and service functions, e.g. by arranging space for services on the ground floor and apartments on the first floor of the building. Such properties, as well as those serving exclusively office or warehouse functions, are available in Orange's offer . For more information about them, it is best to contact sales advisors.