No Right to Deduct VAT on Insulation Costs for Residential Buildings, Confirms Tax Authority

• The case involves a housing cooperative undertaking insulation and thermal modernization of buildings with co-financing from the Regional Fund for Environmental Protection and Water Management.
• The cooperative is a registered VAT taxpayer engaged in property management, property handling, property rental, and exchange of residential and commercial premises.
• The planned thermal modernization in 2025 will involve residential buildings with only residential units, used exclusively for VAT-exempt activities.
• The cooperative questioned whether it has the right to deduct VAT on services related to the insulation of residential buildings.
• The Director of the National Tax Information confirmed the cooperative’s position that it cannot deduct VAT for these services.
• According to VAT law, the right to reduce the tax amount is only applicable when goods and services are used for taxable activities.
• The expenses for insulation are directly linked to VAT-exempt activities, as fees for residential units and contributions to the renovation fund are VAT-exempt.
• The renovation fund is created from contributions that are VAT-exempt, and invoices for non-taxable or VAT-exempt transactions do not allow for VAT deduction.
• The interpretation confirms the principle that purchases not related to taxable activities do not allow for VAT deduction.

Source: mddp.pl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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