What taxes must an individual pay when renting out premises?

The need to use residential premises for an office arises, as a rule, due to a lack of funds. Renting an office involves considerable expenses, and therefore entrepreneurs often look for economical options.

Question: An LLC acquires residential premises with the aim of making repairs in it, and then using it for business activities and converting it into non-residential premises for an office. Is it legal to take into account the costs of purchasing residential premises as expenses under the simplified tax system? View answer

Is it possible to rent an apartment for an office?

Today, the real estate market offers entrepreneurs both non-residential and residential premises, the design of which ultimately turns out to be much cheaper. However, it is worth understanding that not all types of business activities can be carried out on the territory of a residential complex.

What the law says

Provisions of Art. Art. 288 and 671 of the Civil Code, establish as an axiom the following provision: any residential premises are intended only for the residence of citizens, and these articles refer to paragraph 2 of Art. 17 of the Housing Code, which in turn allows the use of apartments or houses as offices for individual entrepreneurs, subject to several conditions:

1. The apartment is owned by the entrepreneur.
2. The establishment of an office does not interfere with or violate the interests of other persons living both in the apartment and in the house.
3. The apartment meets all the requirements of a living space when creating an office-type room or an office as a whole.

In other cases, it is necessary to re-register the house as a non-residential premises.

For individuals who are tenants of residential premises, administrative liability may arise for using an apartment as an office, in accordance with Art. 7.21 of the Code of Administrative Offenses of Russia, therefore it is important to comply with all the subtleties of conducting business activities on the territory of residential areas.

Features of renting residential premises for an office

Is it possible to rent an apartment for business activities? You can, but you must follow all laws. To comply with the standards, a legal entity can issue a lease agreement for its employees. It must be remembered that the Civil Code of the Russian Federation prohibits conducting commercial activities on the territory of a residential premises. However, the Housing Code of the Russian Federation makes it quite legitimate.

To comply with the law, you need to take a responsible approach to drawing up a lease agreement. The conclusion of the agreement is based on these principles:

• The contract must include provisions with all the nuances.
• The document must contain an unequivocal ban on industrial production, since it is prohibited by law.
• If the premises are rented by a legal entity, you must correctly indicate the purpose of the agreement. If the goal is formulated incorrectly, further activities will be fraught with many problems.

The agreement must include information such as:

• The name of the papers confirming the landlord's ownership of the apartment.
• Purpose of the lease.
• Full layout of the premises, description.
• Rental duration.
• Amount of payments.
• Frequency of payments (once a month or once a quarter).
• The amount of compensation that will be paid in case of damage to the premises.
• It is the tenant's responsibility to repair the property and maintain it in good condition.
• Responsibility for paying for housing and communal services.
• Conditions for termination of the agreement.

To avoid problems, it is recommended to indicate all important nuances. Additional requirements may be specified if they comply with the law. If the activity will be carried out by a legal entity or individual entrepreneur, it makes sense to first consult with a lawyer on the issues of drawing up an agreement.

Rules for doing business on the premises

In some cases, registration of housing as non-residential premises is not required and in this case the activities of the entrepreneur are significantly limited by law.

Any business idea related to implementation in a residential building must meet several rules:

1. Do not violate the rights and freedoms of others, in particular neighbors or other residents of the apartment.
2. Do not produce on an industrial scale.

According to Art. 17 of the Housing Code of the Russian Federation, only individual entrepreneurs or citizens providing professional services at home can carry out labor activities in the territory of their own housing. This opportunity is not provided for legal entities and companies cannot resort to the possibility of creating office space in an apartment.

Legal entities are allowed to use as an office only those apartments or houses that have been transferred to non-residential stock in accordance with the rules and specifics of Russian legislation.

Without re-registration, their own home can be used as an office by:

• lawyers;
• nannies;
• tutors;
• accountants;
• consultants;
• translators, etc.

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When drawing up a lease agreement for an apartment for office space, it is necessary to rely on the law and strictly follow legal norms. For legal entities, you can draw up a lease agreement only for the use of the apartment as housing for employees of the enterprise.

Despite this, many apartments are used as offices for a variety of categories of entrepreneurs and businessmen. On the one hand, according to the norms of the Civil Code of the Russian Federation, carrying out commercial activities on the territory of living space is not permissible, on the other hand, according to the norms of the Housing Code of the Russian Federation, this is quite possible and true.

Drawing up a lease agreement requires great care and knowledge of the intricacies of the law in this matter, since through ignorance you can easily violate several rather serious legal norms.

The contract must be concluded based on the following rules and regulations:

• a lease agreement must be drawn up indicating all the subtleties and nuances necessary for this act;
• the contract must clearly state that the placement of industrial production on the premises is prohibited, since this action is contrary to the law;
• the residential premises must meet all the requirements of office buildings - from the presence of an additional emergency entrance to compliance with fire, environmental and other safety standards and regulations;
• When using the living space, the tenant is obliged to respect the rights and interests of the neighbors of the property owner.

For legal entities, it is vitally important to correctly and clearly formulate the purpose of drawing up a lease agreement for residential or non-residential premises, since incorrectly specifying the purposes can lead to a large number of problems.

Any apartment rental agreement must reflect the following nuances:

• documents on real estate ownership;
• purpose of the lease;
• detailed plan or description of the living space;
• rental period of the premises;
• the amount of monthly (or quarterly) payments;
• amount of compensation for damage to the apartment;
• responsibilities for the repair and use of the home;
• obligations to pay for utilities;
• conditions for termination of the contract.

Possible problems

The most important problem with leasing residential real estate for commercial use is legislative delays and contradictions, which speak only to one general aspect - legal entities cannot rent housing for office space. This opportunity exists only for individual entrepreneurs and citizens engaged in the provision of professional services.

A possible solution to the problem is to close the LLC and register the citizen as an individual entrepreneur, however, if it is impossible to carry out such procedures, you can try to arrange a sublease for an individual entrepreneur, which is under the control of the LLC.

Representatives of the financial department recently returned to consider the issue of recognizing expenses for renting residential premises for businessmen to conduct business activities.

The Letter of the Ministry of Finance of the Russian Federation dated March 28, 2017 No. 03-11-11/17851 analyzed the possibility of recognizing expenses for renting a residential building to accommodate a private kindergarten.

First of all, financiers turned to the provisions of housing legislation.

According to clause 2 of Article 15 of the Housing Code of the Russian Federation, an isolated premises is recognized as residential, which is real estate and is suitable for permanent residence of citizens. Residential premises include a residential building (part of a residential building), an apartment (part of an apartment), a room (clause 1 of Article 16 of the Housing Code of the Russian Federation).

TAX AUDIT

Residential premises are intended for the residence of citizens (Clause 1, Article 17 of the Housing Code of the Russian Federation).

A citizen who owns a residential property can use it for personal residence and for the residence of his family members. Residential premises can be rented out by their owners for living on the basis of an agreement.

The placement by the owner of enterprises, institutions, and organizations in the residential premises he owns is permitted only after the transfer of such premises to non-residential premises. The transfer of premises from residential to non-residential is carried out in the manner determined by housing legislation.

At the same time, it is allowed to use residential premises for carrying out professional activities or individual entrepreneurial activities by citizens living there legally, if this does not violate the rights and legitimate interests of other citizens, as well as the requirements that the residential premises must meet.

IP REGISTRATION, PRICE

In accordance with paragraph 3 of Article 23 of the Civil Code of the Russian Federation, the rules of the Civil Code of the Russian Federation, which regulate the activities of legal entities that are commercial organizations, are applied to entrepreneurial activities of citizens carried out without forming a legal entity, unless otherwise follows from the law, other legal acts or substance legal relations.

In accordance with paragraph 4 of paragraph 1 of Article 346.16 of the Tax Code of the Russian Federation, taxpayers who apply the simplified tax system with the object of taxation “income reduced by the amount of expenses”, when determining the object of taxation, reduce the income received by the amount of rental (including leasing) payments for the leased property ( including leased property.

According to clause 2 of Article 346.16 of the Tax Code of the Russian Federation, expenses are accepted subject to their compliance with the criteria specified in clause 1 of Article 252 of the Tax Code of the Russian Federation.

And the conclusion of the financiers is that the entrepreneur’s expenses for renting a residential building to house a private kindergarten should not be taken into account when determining the object of taxation under the “simplified” tax.

Important!

Thus, civil and housing legislation does not allow the use of residential premises for purposes not related to the residence of citizens. The latter circumstance, in the opinion of regulatory authorities, makes tax accounting of expenses for renting residential premises impossible (Letter of the Ministry of Finance of the Russian Federation dated March 28, 2017 No. 03-11-11/17851).

Financiers have expressed a similar position earlier (Letters of the Ministry of Finance of the Russian Federation dated September 29, 2014 No. 03-03-06/1/48504, dated February 14, 2008 No. 03-03-06/1/93, dated October 28, 2005. No. 03-03-04/4/71).

The financiers argue their position by the fact that the expenses of businessmen for renting residential premises do not meet the criteria of clause 1 of Article 252 of the Tax Code of the Russian Federation. And documented expenses mean expenses confirmed by documents drawn up in accordance with the legislation of the Russian Federation.

By violating the provisions of the Housing Code of the Russian Federation (use of residential premises for other purposes), businessmen cannot recognize these expenses as justified.

By virtue of Article 252 of the Tax Code of the Russian Federation, any expenses are recognized as expenses, provided that they are incurred to carry out activities aimed at generating income.

As evidenced by judicial practice, tax authorities do not recognize expenses associated with the repair of residential premises as justified, since the costs of repairing residential premises do not relate to the costs of repairing fixed assets provided for in paragraph 3 of paragraph 1 of Article 346.16 of the Tax Code of the Russian Federation. According to tax authorities, the costs associated with bringing residential premises to a state suitable for use as an office also do not meet the requirements of clause 2 of Article 346.16 of the Tax Code of the Russian Federation.

• according to information from the authorities that register rights to real estate and transactions with it, at the address in Tyumen there is a residential building owned by an entrepreneur;
• there was no transfer of residential premises to non-residential premises;
• documents on the supply of office supplies and water to this address do not clearly indicate the use of a residential building as an office;
• a different address is indicated on the entrepreneur's letterhead. The same address is indicated on most concluded contracts and documents emanating from this person.

Based on the above, taking into account that the entrepreneur has not provided evidence that this property is being rented out or was being prepared for sale, which is his type of business activity, the court’s conclusion about the lawful additional tax assessment is correct (Resolution of the Administrative Court of the West Siberian District dated November 27. 2015 No. A70-15510/2014).

Important!

As we can see, the businessman lost this dispute due to the fact that he could not prove that he carried out activities aimed at generating income in the residential premises. At the same time, the evidence base of the tax authorities, on the contrary, was more convincing.

“TAX HOLIDAYS” FOR INDIVIDUAL ENTREPRENEURS CARRYING OUT ACTIVITIES IN THE PRODUCTION, SOCIAL AND SCIENTIFIC FIELDS

Possible problems when conducting commercial activities

Let's consider the problems that arise when carrying out business activities in an apartment:

• Contradictions in laws. If an entrepreneur faces questions from regulatory authorities, it will be very difficult to defend his position. This is due to the fact that the Civil Code of the Russian Federation and the Housing Code of the Russian Federation contain contradictory provisions.
• Prohibition to conduct activities in the apartment of a legal entity. If a legal entity works in a residential area, there is a very high probability of questions from regulatory authorities. What to do in such a situation? You can close the company and open an individual entrepreneur. If this cannot be done, you can issue a sublease to an individual entrepreneur under the control of a person.
• Choosing a landlord. Who is better to rent housing from? A legal entity or an ordinary citizen? It's not very important. However, if the activity is carried out by a legal entity, the owner of the property must confirm the non-residential status of the premises.
• Problems with neighbors. An entrepreneur is not recommended to enter into conflict with neighbors. Restless residents of a home are always a problem, leading to complaints and inspections. Most of the problems arise when an entrepreneur actively uses the common entrance and entrance. Therefore, it is recommended to build your own exit. This can be done in a living space located on the ground floor. For reconstruction it is necessary to obtain consent from the city administration.

FOR YOUR INFORMATION! Conducting commercial activities in residential apartments involves many dangers. Therefore, the safest option is to transfer the premises to non-residential status.

EXAMPLE No. 1

The company rented a residential building from its director. According to the agreement, the lessor (director) leases to the company a residential building (built in 2010 in good condition, meeting the requirements for occupied residential premises) for use to house the management staff and other services of the tenant.

The company took into account all expenses (rent, repairs) in tax accounting on the basis of clause 49, clause 1, article 264 of the Tax Code of the Russian Federation.

The company incurred more than 4 million rubles in expenses for the renovation of a residential building with subsequent recognition in tax accounting.

The tax authorities' claims boiled down to the fact that the company's expenses incurred in connection with the renovation of a residential building rented from the director, within the meaning of Article 288, paragraph 2 of Article 671 of the Civil Code of the Russian Federation, paragraph 38 of the resolution of the Plenum of the Armed Forces of the Russian Federation and the Plenum of the Supreme Arbitration Court of the Russian Federation dated 07/01/1996 No. 6/8 “On some issues related to the application of part one of the Civil Code of the Russian Federation”, Article 260 of the Tax Code of the Russian Federation cannot reduce the taxable base for income tax.

In addition, by analyzing the reports of completed work, the inspection found that the contractor carried out external cladding of the surface of the walls of the building with facade panels, lining of window openings, as well as repair of junctions of walls and partitions, notching of surfaces for plaster, leveling of plaster, and painting of facades.

Important!

These circumstances indicate the intention of the director of the company to carry out a set of repairs to his residential building at the expense of the company, thus receiving a benefit in the form of a gratuitously renovated residential building (for himself) and in the form of a reduction in the tax base for income tax (for the company itself).

The judges also noted that the owner of a residential premises does not have the right to place enterprises, institutions or organizations in it until it is transferred to non-residential status (clause 3 of Article 288 of the Civil Code of the Russian Federation).

A residential building being leased is not an object of fixed assets of the lessor.

For this reason, the costs of repairing a residential building rented from the director do not form an independent fixed asset and cannot be taken into account as such.

In addition, the court did not see any grounds for reducing the fine under Article 123 of the Tax Code of the Russian Federation to 50 thousand rubles (Resolution of the Administrative Court of the North Caucasus District dated April 24, 2017 No. A53-1756/2016).

ACCOUNTING MAINTENANCE FOR IP, USN

The entrepreneur included in the expenses 63 thousand rubles, spent on payment for a set of works on installation and commissioning of video surveillance systems in his apartment.

These works were carried out under a contract concluded with another individual entrepreneur.

During the tax audit, the inspectorate additionally assessed a single tax paid in connection with the application of the simplified tax system, due to the exclusion of 63 thousand rubles from the expenditure side of the tax base.

The entrepreneur lost in all courts.

Features of converting residential space into non-residential space

If an entrepreneur encounters problems, it makes sense to transfer a residential apartment to a non-residential one. The procedure is determined by paragraph 3 of Article 288 of the Civil Code of the Russian Federation. The premises can be converted to non-residential use only if these conditions are met:

• The apartment is on the first floor. It is also possible to locate it on other floors if there are non-residential spaces under the apartment.
• There should be no permanent residents in the premises.
• If necessary, you need to reorganize the apartment. In particular, a separate entrance is being installed. The refurbished apartment undergoes a special commission.
• The acceptance certificate was sent to the BTI.

After all these procedures have been completed, a commercial company can be officially located in the premises. However, as practice shows, this is practically impossible in the current conditions and it is easier to immediately look for specific premises for business that have non-residential status.

How to transfer an apartment to non-residential stock

The transfer of residential premises to non-residential premises is regulated by Ch. 3 of the Housing Code. The third chapter sets out all the conditions necessary for translation, as well as the rules and procedure for carrying out the entire procedure.

Before submitting documents to re-register residential real estate as non-residential, you must make sure that the housing fully complies with the standards of commercial real estate.

The transfer of residential real estate to non-residential property is regulated by Art. 22 of the Housing Code of the Russian Federation and is carried out subject to the following conditions:

• availability of additional access to the premises;
• absence of persons registered on the premises;
• absence of third party rights and other types of encumbrance;
• the real estate is located either on the first floor or on subsequent floors, provided that there is a non-residential premises under the apartment;
• the living space does not belong to the municipality;
• translation is necessary for conducting ceremonies of a religious organization.

Before contacting the municipality about the transfer of housing, you need to collect a small package of documents to confirm ownership of the premises, as well as general intentions regarding the transfer.

Local authorities must provide:

• an application for the transfer of living space to non-residential stock, where the name of the government authority, full name of the owner and his passport details must be indicated;
• documents reflecting ownership of the living space;
• apartment plan, as well as registration certificate;
• floor plan of the house in which the premises are located;
• if necessary, a project for the reconstruction of living space.

Some documents may not be provided if information about the premises is in the Unified State Register of Real Estate, but in this case it is better to play it safe and provide the entire package of papers to the authorized bodies.

Responsibility for commercial activities in the apartment

If the entrepreneur complies with all the rules and does not disturb the neighbors, most likely no inspections will follow. As a rule, attention from regulatory authorities is caused precisely by complaints from neighbors.

If an offense is discovered, the entrepreneur will face liability on the basis of Part 1 of Article 7.21 of the Code of Administrative Offenses of the Russian Federation. This article prescribes penalties for using housing for other purposes. An offense entails a warning or a fine of 1,000–1,500 rubles. A warning is issued if a violation is committed on a small scale.

Let's consider another situation. The owner provided the premises for rent. He is not a founder or employee of a commercial entity. In this case, he may be brought to administrative liability.

IMPORTANT! Controlling authorities are required to prove that the residential premises were actually used for other purposes. The City Housing Inspectorate is responsible for drawing up a protocol on the violation in question.

Use of the apartment for other purposes is confirmed as follows:

• Testimony from residents of the building.
• Photographs of equipment that was used for commercial profit.
• Indications of violations of sanitary standards.
• Indications that the rights of neighbors have been violated.

The entrepreneur, in turn, can also try to challenge the decision of the regulatory authorities.

IMPORTANT! Liability measures are almost never applied to self-employed citizens (nannies, translators, etc.).

Practical advice

When renting an apartment for an office, it is important to understand the extent of the problems that may arise as a result of the work process.

A large number of entrepreneurs find themselves faced with the choice of renting an apartment from an individual or a legal entity. As practice shows, there is not much difference for the tenant. At the same time, for office premises it is best to choose those apartments where the owner can document its non-residential status.

Disgruntled neighbors

A big problem facing home offices is neighbors. In order to protect your business as much as possible from unexpected complaints and inspections, it is best not to use a common entrance and entrance. The correct and good option is to organize your own door and a small parking lot if the work is related to the client base.

If the office is located in a non-residential building and is equipped with an emergency exit, all fire and environmental safety procedures are observed, and a clear and truthful archive of financial details is created, then no inspections are scary.

If some point of the law is violated, for example, an organization operates in a residential building and uses the apartment as commercial real estate, significant problems may arise both for the owner, if he agreed to rent housing for an office, and for the enterprise itself.

In order to avoid this, you can agree with the owner to convert the apartment into non-residential premises. Or you should rent only those apartments that have already gone through this procedure.

Features of business activity in an apartment

Conducting activities requires certain specifics. It must meet these conditions:

• The activity does not violate the rights/freedoms of apartment residents and neighbors.
• Production on an industrial scale is not expected.

Question: Are expenses for renting residential premises for an office taken into account for income tax purposes (clause 10, clause 1, article 264 of the Tax Code of the Russian Federation)? View answer

Article 17 of the RF Housing Code states that home-based businesses can only be run by individual entrepreneurs and self-employed citizens. A legal entity does not have the right to work in residential premises. Let's consider representatives of specific professions who can carry out their activities in an apartment:

• Lawyers.
• Persons providing consulting services.
• Nannies.
• Accounting workers.
• Tutors.
• Translators.

Also, persons working remotely can carry out their activities in residential premises.

IMPORTANT! The residential premises where business activities are carried out must meet the requirements for offices. In particular, this is the presence of an additional exit, fire and environmental safety.

Useful video

It is quite possible to rent an apartment for an office for individuals or individual entrepreneurs, but for the founders of LLCs, OJSCs, etc. It is worth thinking about the specific formulation of the purposes of leasing real estate so that it does not contradict the law, but at the same time reflects the essence of the acquired rights to the premises.

Attention! Due to recent changes in legislation, the information in this article may be out of date. However, each situation is individual.

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