Priorities regarding taxation is the focus.
Administrative Divide: The Tax Consequences of Serving on a Condominium Association Board
Serving as a member of a condominium association's administrative board can entail significant responsibilities, such as managing accounts, advising property management, and mediating between owners and managers. Despite the time commitment, the financial rewards for these volunteer positions often remain minimal, and careful tax planning may be necessary to avoid unintended consequences.
In Germany, the Federation of Taxpayers reports that it is common for condominium associations (WEGs) to provide a flat-rate or specific compensation for expenses incurred by board members. Examples include travel costs, telephone expenses, and postage. However, tax ramifications may arise from such payments if they are not truly expense reimbursements.
"Reimbursements for verifiable expenses are tax-exempt," explains Daniela Karbe-Geßler from the Federation of Taxpayers. "Flat-rate payments without accompanying documentation, on the other hand, are usually considered taxable income and should be declared in the tax return, typically under 'other income.'"
However, a threshold exists: If a board member's activities do not generate assignable income types, and the total income is below €256 per year, it remains tax-exempt. Regular remuneration or the development of a sideline activity might trigger additional tax implications, with the tax office potentially considering the activity commercial or self-employed.
Personal expenses incurred while performing administrative duties, such as travel costs or office supplies, cannot be claimed as tax deductible expenses because they are not associated with taxable income. An exception applies if the board member has a written agreement with the condominium that explicitly waives reimbursement rights for such expenses. In such cases, a fictitious reimbursement amount may be claimed as a charitable donation under specific conditions, subject to both a written agreement and a donation receipt.
Remarkably, unlike in some other sectors, volunteer allowances or coaching fees do not apply to WEG board members.
When it comes to international condominium associations, tax implications can vary based on the legal framework of each jurisdiction. For instance, in Brazil, the focus tends to be on the tax treatment of condominium fees and expenses rather than board member compensation. Property owners in Brazil typically pay condominium fees proportionally to their ideal fractions within the building, which cover common area maintenance.
Though utilities and telecommunications are considered personal expenses, older buildings in Brazil may include water and gas in the condominium fees. Board members in Brazil are generally not responsible for the condominium's tax obligations, but they may play a role in managing finances and ensuring compliance with tax laws. Board members receiving compensation for their services might be subject to income tax, depending on the nature of the income and any applicable exemptions or legal structures.
If compensated for expenses related to their duties, Brazilian board members may find these reimbursements tax-exempt if they genuinely represent expense reimbursements, so long as detailed records and documentation substantiate this.
As the specific tax implications can differ significantly depending on the jurisdiction and the structure of the condominium association, consulting with a local tax professional is recommended to ensure compliance with all applicable tax laws and regulations.
- In some countries, like Germany, condominium association boards may receive financial compensation for expenses incurred during their duties, but these payments can lead to tax consequences if not properly documented as expense reimbursements.
- For international condominium associations, tax implications can vary based on the legal framework of each jurisdiction. For example, in Brazil, the focus is on the tax treatment of condominium fees and expenses rather than board member compensation, and the taxability of reimbursements for board members' expenses depends on their authenticity and proper documentation.
