What are the income and expenses of an HOA under the simplified tax system, what are the disadvantages, how to transfer funds to accounts and pay tax if there is no separate accounting?

HOAs (homeowners' associations) are created in accordance with the provisions of Art. 135 of the Housing Code of the Russian Federation. Such associations are designed to ensure management of the common property of the owners of an apartment building. The Civil Code of the Russian Federation classifies these partnerships as non-profit organizations (clause 4, paragraph 3, article 50 of the Civil Code of the Russian Federation). Homeowners' associations can independently choose the taxation regime - OSNO or USN. The latter option, especially with the “income minus expenses” object, is more attractive, as it simplifies the accounting process and reduces the number of taxes paid. The procedure for switching to the simplified tax system is regulated by Art. 346.13 Tax Code of the Russian Federation.

Pros and cons of the simplified tax system (simplified taxation system)

A housing organization has the right to choose a taxation system upon creation or during its activities every calendar year. A simplified calculation system involves calculating the amount of tax payment at a rate of 6% of all income of the organization or at a rate of 15% of income reduced by the amount of expenses.

Important! For housing associations that want to switch to a simplified tax payment system, it is possible to switch only to that version of the system in which expenses are deducted from income and the tax rate is equal to 15 percent (Clause 3 of Article 346.14 of the Tax Code of the Russian Federation).

Among the main advantages of the simplified system for HOAs are:

1. Exemption from VAT.
2. The ability to reduce the tax base when new residents of the house join the partnership.
3. Possibility to exempt from taxes the profits of a housing association arising as a result of economic activities.
4. The possibility of maximizing the amount of taxes paid by leveling the income-expense difference.

It is possible to reduce the difference between the income and expenditure side regardless of the size of the net income side, which is a significant advantage for large housing structures.

The disadvantages of the simplified system in relation to housing associations include:

• The need for additional accounting operations for correct balance of accounts.
• Growth of the tax base with increasing debt of the organization.

The tax base may also grow in cases where individual residents enter the HOA when they sign contracts with the board for the full use of internal services for repairs and maintenance of housing, since in this case, payment for such services will be included in the income of the housing association.

This is especially sensitive for small HOAs (up to 50 apartments).

What to do to get money into the budget?

In order for tax payments to reach the budget, the following actions must be taken::

1. Calculate the amount to be paid.
2. Open a current account with a bank that provides cash and settlement services.
3. Compose a payment order indicating the amount and the recipient’s account.

Considering the extensive list of taxes that an HOA must pay, as well as the many nuances, specifics of calculation and liability for late payment or incomplete payment of taxes, such a matter should be entrusted to a competent specialist.

At the same time, the accountant may be entrusted not only with the responsibility of conducting relevant affairs, but also with choosing the taxation system and the method of paying tax payments. The financial stability of the organization may depend on making the right decision (to pay income tax, VAT, property tax or payment provided for by the simplified taxation system).

What are the income and expenses of an HOA?

In a simplified method of calculating the amount of tax, income includes the following types of cash receipts:

1. Proceeds from the sale of property.
2. Subsidies from the municipality.
3. Acquisition by the board of property rights to real estate.
4. Payment of receipts for utilities and repairs of common premises from residents who have not joined the HOA.
5. Payment for services organized by the housing association, apartment owners who have not joined it.

Reference! Membership, entrance and other fees of tenants-members of a housing association are not included in the income part under the simplified method of taxation, since these contributions are considered targeted income (clause 1 of Article 251 of the Tax Code of the Russian Federation).

In order for the contributions of residents belonging to the organization to be considered targeted, it is necessary to describe the structure of such contributions in the annual budget.

The following financial receipts are also not included in the amount of income:

• Contributions to the reserve fund.
• Payment according to receipts for major repairs.
• Sponsorship and charity.
• Free services provided.
• Income from business activities.

Expenses in housing associations, according to recommendations drawn up by the State Committee on Housing Policy, are divided into:

1. Administrative.
2. Technical and repair.
3. Other.

Administrative expenses include expenses for the maintenance of the management apparatus of the HOA, as well as office premises for permanent full-time employees.

This includes expenses for salaries of employees, maintenance of premises, etc.

Technical expenses include expenses for repairs and maintenance of common property.

Important! With a simplified tax policy, housing association expenses incurred within the framework of statutory activities are not taken into account.

The list of expenses by the amount of which the tax base is reduced only takes into account:

• Expenses that go beyond the approved target estimates.
• Material costs.
• Salaries for employees.
• Internal overhead costs.
• Insurance costs.

It must be taken into account that the statutory goals of the simplified tax system are considered to be the maintenance and repair of common property , as well as the provision of utilities by the HOA, without taking into account possible hired labor.

More information about the income received by the HOA and which of them is reflected in the reporting can be found here.

Comparison of tax options for TSN

The table below presents comparative characteristics of various taxation options that can be applied to TSN

Example No. 1.

TSN "Rial" has an agency agreement with apartment owners to accept utility payments. The reward is 0.5%. TSN does not pay VAT. Is on a simplified basis and has the right to benefits on social insurance contributions.

Income for the year: (click to expand)

The costs were:

Please note that utility bills are not included in revenue, as well as expenses.

The table shows payments to the budget

The presented calculations indicate that the use of the simplified tax system for TSN “Romashka” is much more profitable in terms of the amount of payments to the budget. The savings are justified by a reduction in tariffs for social insurance contributions.

Example No. 2. Let's take the same conditions as in the first example, but with the caveat that TSN does not have hired employees. Then the expenses for the year will be 950 tr. These amounts cannot be deducted when calculating the single tax (according to the Tax Code of the Russian Federation), which means the tax amount for the year will be equal to 159 tr. And the income tax at the same costs will be only 22 tr, which is more profitable for the company.

How and in what documents should it be reflected?

The income and expense components of the financial activities of the HOA must be reflected in the following documents:

1. Income and expenditure estimate.
2. Tax return.
3. Report.
4. Internal documents.

The preparation of annual income and expenditure estimates is the responsibility of the board of the housing association, and the approval of such estimates falls within the competence of the general meeting of residents (Part 3 of Article 148 of the Housing Code of the Russian Federation).

Internal accounting documents are filled out by an accountant and must contain entries (or account assignments) corresponding to each transaction of receipt or expenditure of funds.

Changes to the simplified tax system in 2021

Previously, a taxpayer lost the right to the simplified tax system when income exceeded 150 million rubles or the number of employees became more than 100. Then it was necessary to switch to a general taxation system. But some pleasant changes have been made to the Tax Code.

Now, with income from 150 to 200 million rubles and with the number of employees from 100 to 130, the business does not lose the right to the simplified tax system. It’s just that the rate becomes higher: 8% for the simplified tax system “Income” and 20% for the simplified tax system “Income minus expenses”. The increased rate is applied from the quarter when the business has exceeded the previous limits.

And only with an income of more than 200 million rubles and the number of employees more than 130, there is no way to escape from the general system.

Accounting for Income and Costs

With a simplified tax calculation system, it is important to separate funds received as payment for services from members of the HOA and from residents who have not joined the organization; this is done using entries D 86 and K 26.

Other entries that allow you to take into account basic income and expenses include:

• Receiving subsidies – D55 and K50.
• Expenses for repair work – D20 and K60.
• Receipt of contributions – D76 and K86.
• Payment on receipts for special services of non-HOA members – D76 and K60.
• Expenses for payment of services of suppliers – D91 and K60.
• Tax calculation when using the simplified tax system - D26 and K68.
• Profit from renting out premises – D62 and K90.

If there is no separate accounting, then all receipts are considered income on which taxes must be paid.

Important! To exclude profit from business activities (including rental of premises) from the total amount of income under the simplified tax system, you need to use entries D84 and K86, which transfer commercial profit into funds for targeted financing.

The legislative framework

IMPORTANT: Any organization when maintaining accounting records is obliged to adhere to the relevant legislative norms. Otherwise, such activity will be illegal.

All accounting in the HOA is carried out in compliance with the following acts and regulations:

• letter of the Ministry of Finance of the Russian Federation No. 03-11-04/2/58;
• position No. 43n;
• position No. 34n;
• chart of accounts No. 94n;
• Order of the Ministry of Finance No. 66n;
• Tax code.

These are the main regulations necessary for carrying out accounting activities. All HOA records are kept in compliance with these documents. HOAs have their own accounting features. For example, accounting in HOAs and housing cooperatives have significant differences. The differences arise due to the fact that the HOA does not make a profit from its activities. And if income exists, then it is used only to achieve the goals set for the partnership.

The HOA accountant has many tasks, including detailed accounting of possible debts of residents, fees, additional expenses, etc. And therefore, accounting uses a huge number of different entries and subaccounts, which only a good specialist can handle.

The advantage of a homeowners' association is that it consists of residents of an apartment building, which means that they can influence the financial policy of the organization. However, in practice, one of the homeowners rarely acts as an accountant.

REFERENCE: Most often, a specialist is brought in from outside, for example, from a management company. But the law does not contain conditions indicating that a tenant of an apartment building cannot act as an accountant. The main thing is that he has the appropriate education and work experience.

Reporting

With a simplified system, the accounting department of a housing association reports income and expenses in the following ways:

1. Drawing up a report for submission to the auditor and housing inspection authorities.
2. Filling out a tax return.

The report for regulatory authorities must reflect the following information:

• The amount of planned income and expenses, in accordance with the estimate approved by the general meeting.
• The amount of actual expenses incurred and income received.
• Sources of income.
• Directions of expenses.
• Reasons for overexpenditures and other discrepancies.
• Information about taxes and insurance fees paid.

The report is subject to submission to the auditor and the annual general meeting of owner-members of the HOA. The source of information for generating the report is the accounting ledger and regular payroll records.

For more information on how an HOA submits its reports and balance sheet to the simplified tax system, as well as what accounting entries are made, read our material.

Who does not suit the simplified tax system?

If you are on this list, you will not be able to switch to the simplified tax system:

• annual income above 200 million rubles,
• LLC with branches,
• banks and microfinance organizations,
• organizations in which more than 25% of the authorized capital belongs to another organization,
• pawnshops,
• insurers,
• companies with more than 130 employees,
• organizations with fixed assets worth more than 150 million rubles,
• non-state pension and investment funds,
• professional participants in the securities market: brokers, dealers, securities managers and others from Chapter 2 of Law No. 39-FZ,
• organizations and individual entrepreneurs that produce excisable goods, extract and sell minerals, except for common ones,
• gambling organizers,
• notaries and lawyers,
• participants in production sharing agreements,
• payers of the single agricultural tax,
• state and budgetary institutions,
• foreign organizations,
• outstaffing companies.

Filling out the declaration

The tax return of a housing association under the simplified tax system must be filled out in accordance with the form approved by Order of the Tax Service No. 7-3-99. The text of the declaration must contain the following information:

1. Name of the HOA.
2. Taxable period.
3. Details of the partnership as a legal entity, incl. banking.
4. Name and code of the tax office where the information is provided.
5. Code of activity of the partnership according to the classifier.
6. The amount of advance payments received as of the date of filing the declaration.
7. The amount of tax payable, minus advance payments.

Attention! With a simplified calculation scheme, the tax is calculated independently by the accounting staff of the housing association, but the tax service has the right to initiate a verification of the calculation data by requesting the necessary payment documents from the board.

You can find out how to correctly fill out a declaration under the simplified tax system in our article.

Other types of TSN reporting depending on the availability of taxable objects

In addition to the main taxes listed above, TSN is also required to pay other taxes . This fact depends on whether they have a corresponding taxable object.

1. Property tax. Applies if the property is used for commercial or other economic purposes. The tax rate is determined by the cadastral or book value of the property.

Important! The property tax declaration is submitted to the Federal Tax Service by March 30. The form was approved by Order of the Federal Tax Service dated March 31, 2017 No. ММВ-7-21/ [email protected]

1. Land tax. It is calculated and paid only when TSN has its own land plot. The tax base in this case is the cadastral value of the plot. And the rate is set at the municipal level.

Important! The land tax declaration is submitted to the Federal Tax Service by 02/01/2021. The form was approved by Order of the Federal Tax Service dated May 10, 2017 No. ММВ-7-21/347 @.

1. Transport tax. It is calculated and paid if TSN has any equipment (trucks, special equipment, passenger vehicles). The tax is calculated at rates adopted by regional authorities based on data on the power of equipment.

Important! The tax return is submitted to the Federal Tax Service after the end of the calendar year, before February 1, in the form of Federal Tax Service Order No. ММВ-7-21 dated December 5, 2016/ [email protected]

1. Personal income tax. The rate is set depending on the employee’s status. If the status is resident, then the rate is 13%. If the employee is a non-resident, then the rate is up to 30%. The 6-NDFL declaration is submitted quarterly no later than the 31st day of the reporting month.

Important! The declaration form was approved by order of the Federal Tax Service dated October 14, 2015 No. ММВ-7-11/ [email protected]

Due dates

The completed declaration must be submitted by the responsible person no later than the end of March of the year following the reporting year, in accordance with Part 1, Clause 1, Art. 346.23 Tax Code of the Russian Federation.

When liquidating a housing association, it is necessary to submit a closing reporting declaration to the tax service no later than the 25th day of the month following the month of liquidation of the housing structure (clause 2 of Article 346.23 of the Tax Code of the Russian Federation).

The date for submitting internal reports of the housing association is determined by the charter and the general meeting of the organization’s tenants; as a rule, such reports are presented in early January or late December at the annual meeting of property owners.

So, a simplified tax assessment system can reduce the taxation expenses of a housing association, provided that the organization of residents is large enough and the majority of residents of houses entrusted to the HOA are its members. If there are significant debts of residents (more than 10% of assets) in the housing structure, it is better to use a common payment system.

Types of insurance premiums in a partnership

The final amount of contributions is established by the Tax Code of the Russian Federation. The obligation to charge these payments to each employee has been established.

The amount is indicated in Art. 426 Tax Code of the Russian Federation:

• 22% are transferred to the Pension Fund department;
• 2.9% should be transferred to the Social Insurance Fund;
• 5.1% is intended for compulsory medical insurance.

These amounts are formed using contributions made by members of the partnership. The amount is established at the general meeting. In addition, one-time payments may occur. For example, when the funds are intended to create an HOA.

Important! These payments cannot be considered as payment of earnings. For this reason, insurance premiums are not paid.

How to reduce the simplified tax system “Income”

Insurance premiums for individual entrepreneurs and employees can be deducted from the tax. To do this, follow two main rules:

• An individual entrepreneur without employees can reduce the tax completely, but an individual entrepreneur with employees and all LLCs can only reduce it by half.
• The tax is reduced only by those contributions that you paid in the same period for which you are calculating the tax. For example, on March 18 you paid 10 thousand rubles in insurance premiums. By this amount you will reduce the simplified tax system for the first quarter.

Read about the nuances of tax reduction in the article “How to reduce the amount of tax on the simplified tax system.”

How to reduce the simplified tax system “Income minus expenses”

Due to business expenses, it is not the tax that is reduced, but the tax base - the amount on which you calculate the tax. Here you need to be careful: you can only take into account expenses that are useful for the business and allowed. Their list is contained in Art. 346.16 of the Internal Revenue Code.

Important: each expense must be confirmed with a document confirming payment and receipt of the product or service. Payment is confirmed by a cash receipt or account statement, and receipt of goods or services is confirmed by an invoice or act. Keep these documents in case of a tax audit.

Read more about this in the article “Rules for writing off expenses on the simplified tax system”

Which simplified tax system to choose

This depends on two factors:

• What tax rate applies in your region. Look on the tax website in the “Features of regional legislation” section. It may turn out that for your business the rate of the simplified tax system “Income minus expenses” is even less than the simplified tax system “Income”.
• The amount of business expenses. Typically, the simplified tax system “Income” is suitable for the service sector, where costs are small, and the simplified tax system “Income minus expenses” is suitable for trade. If the simplified tax system rate is the maximum, then the share of business expenses should be 70-80% in order for applying the simplified tax system of 15% to be profitable.

Good to remember

1. The simplified tax system is not suitable for: banks, lawyers, LLCs with branches.
2. The limit for switching to the simplified tax system is 200 million rubles and up to 130 employees.
3. There are two types of simplified tax system: “Income” 6% and “Income minus expenses” 15%. Before making a choice, look at regional legislation and estimate business costs.
4. The simplified tax system “Income” is reduced by insurance premiums for individual entrepreneurs and for employees.
5. On the simplified tax system “Income minus expenses” you can only take into account expenses from Art. 346.16 Tax Code, useful for business and supported by documents.
6. The simplified tax system is paid every quarter, and the declaration is submitted once a year.
7. You can switch to the simplified tax system only from the beginning of the calendar year or within 30 days after registering a business.

The article is current as of 02/04/2021