Priorities in Taxation Matters: Users' Perspectives
Managing a Condominium Association: Understanding Tax Implications for Administrative Board Members
Owning a unit in a condominium association (WEG) often involves playing an active role as an administrative board member, overseeing finances, advising property management companies, and serving as a liaison between the property owner and manager. Yet, from a tax perspective, the remuneration for such duties is minimal—often nothing at all.
Many condominium associations rely on volunteers for their administrative boards. These dedicated individuals perform essential tasks without receiving a salary. However, it's worth noting that some associations may cover specific expenses related to the board member's duties, such as postage, telephone, travel to meetings, or other activities. In this case, it's essential to be cautious, as not every payment can be classified as tax-exempt.
Treading Carefully with Flat-Rate Payments
"Reimbursements for expenses incurred are tax-free," says Daniela Karbe-Geßler from the Federation of Taxpayers. "However, flat-rate payments without itemized receipts are considered taxable income and must be declared in the tax return, generally categorized as other income."
There is a threshold, nonetheless. If the services cannot be classified under any income category and total less than €256 per year, these earnings will not be taxed. However, if the activity is consistently remunerated or evolves into an ancillary business, the tax office might view it as a commercial or self-employed activity.
No Option for Volunteer Allowance
Personal expenses incurred while performing duties as an administrative board member, such as travel costs, office materials, or telephone expenses, cannot be claimed as tax deductibles because these expenses do not stem from taxable income that can offset them.
There's an exception only if the administrative board members have a right to reimbursement from the condominium association, which they voluntarily waive. In such circumstances, the fictitious reimbursement amount can be deducted as a donation subject to specific conditions, given a written agreement and donation receipt.
"The volunteer allowance or coach's allowance common in other sectors does not apply to WEG board members, as their activity is not in the non-profit or educational and cultural sectors," says Daniela Karbe-Geßler.
Role, Duties, and Fiduciary Responsibilities
As board members, these individuals hold a fiduciary duty to act prudently and serve in the best interest of the condominium owners. They are entrusted with managing common expenses transparently and efficaciously, often subject to specific condominium laws and relevant corporate or nonprofit statutes.
(Related: Brazil's Condominium Association Tax Context*)
In the Brazilian context, condominium associations do not typically have legal personality, but manage common expenses funded by condominium fees tied to property ownership. Board members’ administrative expenses related to fees are part of the common expense structure. Taxes such as the Urban Property Tax (IPTU) remain the responsibility of property owners, regardless of lease agreements.
- Despite the essential roles played by administrative board members in a condominium association, their remuneration is typically minimal or non-existent, with some associations covering specific duty-related expenses that might or might not be tax-exempt.
- In contrast to other sectors, volunteer allowance or coach's allowance does not apply to administrative board members of a condominium association, as their activity does not fall under the non-profit or educational and cultural sectors.
