Increased domestic help credit boosts renovation trade

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Renovation and refit businesses, particularly in the Greater Helsinki area, are busier than ever, and their workload appears to be overwhelming.
     
”The end of last year and the beginning of the current year have been busier than ever before at this time of year”, says Seppo Käyräkangas, the owner of Rakmaster, a company which is in charge of a renovation project in a home in Helsinki’s district of Länsi-Pasila.
      ”The increase in the domestic help credit granted by the Finnish Tax Administration has encouraged people to order larger renovations. A mere bathroom repair is not necessarily sufficient”, Käyräkangas reports.
      Rakmaster employs ten permanent workers. To even out the peak periods, the company hires individual enterpreneurs who work under their own business name. Reliable partners, particularly plumbers, are needed.
     
Just as busy as Rakmaster is another company called Rustholli Remontit, which has branch offices in eight locations and a total of around 200 employees.
      ”Last autumn people were scared, but now their enthusiasm has returned, and they are serious about starting renovation projects”, says Matti Tölli from Rustholli Remontit.
      Good signs of the trend could be seen at an exhibition in Vantaa’s Myyrmäki Hall last weekend, Tölli reports.
      ”The domestic help credit, the low level of interest rates, pay rises, and small tax cuts are all bound to encourage people”, Tölli sums up.
     
The Harjavalta-based furniture manufacturer Puustelli has suffered from the rapid deflation of the construction industry. Puustelli is the most popular furniture brand in Finland, known especially for its fitted kitchens.
      ”The constrution of new houses has declined, but the number of renovations has increased”, reports Lauri Jalkanen from Puustelli. Jalkanen is in charge of the Greater Helsinki area.
     
”The expanded domestic help credit has set renovations going particularly in the capital area”, Jalkanen notes.
      Director Timo Leskinen, who is responsible for Puustelli’s sales in the entire country, agrees, saying that the scope of renovations is also growing.
      The share of work in a medium-sized kitchen renovation is approximately EUR 2,500 to 4,000. If the cost of the fittings themselves amounts to EUR 9,000, the total amount including household appliances could come to EUR 14,000 on average.
     
If the amount of work totals EUR 4,000, the tax credit is EUR 2,400, provided that the domestic work has been done by an enterprise.
      A renovation of a kitchen creates jobs even outside the individual home. According to the estimates of the Puustelli Group, a total of 150 persons participate directly or indirectly in the renovation of an average kitchen in Finland.
     
It is estimated that the job creation impact of the entire process is some 15 to 20 working days.
     
     
FACTFILE: Interior design does not qualify for domestic help credit
     
At the beginning of the current year the maximum amount of the domestic help credit was increased to EUR 3,000. Because the tax credit is individual, a couple can get a deduction of EUR 6,000 in 2009.
      In comparison, the maximum amount of the domestic help credit in last year’s taxation was EUR 2,300.
     
The taxpayer is entitled to deduct from his or her earned income a total of 30% of the salaries plus secondary expenses paid for the domestic services.
      In a case of an entrepreneur or a company belonging to the prepayment register the deduction is 60 %.
     
A liability of EUR 100 will first be subtracted from the total of deductible costs incurred in a year.
     
The taxpayer will have to apply for the tax credit either after the fact, when his or her final taxes have been assessed, or in advance, in which case it could be deducted from the tax withheld in advance.
     
Maintenance and renovation of homes and holiday homes are the most usual services which households buy from various entrepreneurs and for which the Finnish Tax Administration can grant the domestic help credit.
      Furthermore, domestic services, renovation and IT work that has been done in the taxpayer’s parents’ or spouse’s parents’ home, or in the holiday home, will also qualify for the domestic help credit.
     
For example, households are now able to apply for the domestic help credit for all improvements relating to water and sewage systems, energy and heating systems, electrification, as well as air conditioning.
     
Interior design work is not covered by the domestic help credit unless it is part of a bigger project, such as a kitchen renovation.


Previously in HS International Edition:
  Domestic help credit expanded and increased from January 1st (5.1.2009)
  Government to raise domestic help credit to EUR 3,000 (29.8.2008)

Links:
  Finnish Tax Administration
  Taxpayers´ Association of Finland

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