Can personal expenses be a tax deduction?

Service-Tax

Running a company always involves various expenses. Some of them can be classified as tax deductible and some not. The purpose and nature of the expense are of key importance here. Check in our article when personal expenses may be a tax deduction!

Tax deductible costs - what can be included?

In order to qualify a given expense as company costs, it must meet the conditions set out in Art. 22 sec. 1 of the PIT Act. The key requirement is that the expense is incurred to earn income or to keep or secure its sources. In addition, you must take into account the list of costs that may not constitute tax deductible costs (so-called NKUP), contained in Art. 23 of that legal act.

The following are examples of standard expenses that can be classified as tax costs:

  • purchase of commercial goods and materials,
  • salary payment,
  • bank fees for maintaining a company bank account,
  • purchase of fuel for a company car,
  • purchase of office supplies for business purposes.

Personal expenses in tax deductible costs

The expense may constitute a tax deductible cost if it is related to the conducted business activity. In a situation where there is no such relationship, the incurred expense cannot be a tax cost. It should be mentioned here that a large part of personal expenses, despite the fact that they are indirectly related to the company, cannot be qualified for BUY. The best example of this can be acquired for an entrepreneur:

  • corrective glasses or contact lenses,
  • swimming pool or fitness pass,
  • vaccinations,
  • a visit to the dentist,
  • life policy.

It should also be emphasized that, in addition to those listed, there are also more "twisted" ideas - such as a nursery or summer camps for the taxpayer's children.

In the case of expenses for glasses or lenses, etc., the taxpayer, purchasing them for himself, has no right to reduce his company's revenues by them. This is confirmed, inter alia, by interpretation below:

Interpretation of the Director of the Tax Chamber in Bydgoszcz of February 10, 2009, file ref.ITPB1 / 415-790 / 08 / AK:

(...) the expenditure on the purchase of corrective glasses is to protect his health. Expenses related to the health condition of a self-employed person are expenses of a personal nature. In the event of a sight defect or its worsening, a natural person is forced to purchase glasses with appropriate lenses, regardless of whether he conducts business activity or does not conduct such activity. Thus, the immediate purpose of incurring this type of expenditure is to protect the eyesight, and not to generate income from non-agricultural economic activity. Incurring expenses for the purchase of glasses has no real impact on the amount of revenues obtained from the provision of services performed as part of the conducted business activity, or on the relationship with the conducted activity as a source of revenues.

 

There are exceptions in tax interpretations that allow you to enter certain expenses into the tax return. However, they refer to specific forms of activity. As an example, it is worth citing the following interpretation:

 

Interpretation of the Director of the Tax Chamber in Warsaw of March 10, 2010, file ref. IPPB1 / 415-17 / 10-2 / AM:

The applicant runs a licensed business activity entered in the register of economic activities of the President of the City, consisting in the protection of persons in accordance with the Act on the Protection of Persons and Property of August 22, 1997. The Applicant would like to include in company costs (...) costs related to maintaining physical condition (swimming pool , gym, martial arts). (...) the specificity of business activity in the field of personal protection and special training allows for the recognition of expenses for the swimming pool, gym and martial arts aimed at maintaining good physical condition of the Applicant to the costs of economic activity.

 

So a gym pass - normally classified as a personal expense - in this specific case, described above, may be a tax cost.

To sum up, whether a given expense can be classified as tax deductible depends on a thorough analysis. It is worth knowing that in the event of an inspection, the taxpayer must clearly demonstrate the relationship between the cost incurred and the revenues earned. It is the entrepreneur who decides about the purposefulness and necessity of a given expense within the company - although in reality his interpretation of the regulations may turn out to be unambiguous for the tax office.