Is it possible to have two telephones in a sole proprietorship?
Today, almost every entrepreneur uses a telephone in the company. Therefore, the question arises whether it is possible to have two telephones registered in a sole proprietorship? The matter is simple - if they are intended only for the purposes of calls made for the benefit of the company. There are then no objections to having two company cell phones.
Business phone and tax deductible costs
Pursuant to Art. 22 sec. 1 of the PIT Act, tax deductible expenses are expenses that meet 3 conditions in total:
- were actually incurred;
- they were incurred in order to generate income or to maintain or secure a source of income;
- are not included in the list of non-tax deductible costs in art. 23 sec. 1.
During the inspection of tax authorities, the greatest challenge for the taxpayer may be to prove that the mobile phones used meet the condition of expenses incurred in order to obtain income. The taxpayer must prove that it uses them exclusively for the purposes of the enterprise.
Jan Kowalski runs a sole proprietorship, the subject of which is the sale of bicycles and their service. Mr. Jan bought two cell phones for the company. Is it possible to include in the costs the expenses incurred for the purchase of two phones in a sole proprietorship?
As a rule, if an expense meets the conditions for being tax-deductible, there are no contraindications to include their purchase in company costs. In the event of a possible inspection, Mr. Jan can indicate and prove, by presenting bills, that one telephone is used for dealing with current office matters, and the other is for contacting customers and servicing the service. However, it should be remembered that the more telephones registered for a sole proprietorship, the more difficult it will be for the taxpayer to explain that they are 100% used only for the conducted business activity.
Two telephones in a sole proprietorship and fiscal control
If, during an inspection by a tax officer, it becomes apparent that private calls were made from the business telephone, this may have consequences of varying importance.
The taxpayer will be required to reduce the costs by the expenses incurred for private calls. In addition, a tax arrears may arise, which the taxpayer is obliged to pay, together with tax interest, without the request of the tax authorities. In addition to interest on tax arrears for improperly qualified costs, the conduct of the entrepreneur may be considered a tax crime or offense, and thus the taxpayer will face the risk of penal fiscal liability. If it is found that the telephone sets are not used for the purposes of business activity, but for the personal purposes of the taxpayer, employees or other persons, the related expenses cannot be considered tax deductible costs (Article 23 (1) (49) of the PIT Act). Therefore, in a situation where an entrepreneur uses a business telephone also for private purposes, the best solution will be to settle costs on the basis of billing. However, it is safer to have a separate private telephone and one registered for the company, because then the expenses related to the subscription and connection costs can be easily classified as tax deductible costs for business activities.
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Use of a private telephone in business
Apart from the case where the entrepreneur uses two telephones in a sole proprietorship, there may also be a situation where the taxpayer uses a private telephone for business purposes. Expenses incurred for business calls from a private telephone are eligible to be considered tax deductible expenses. If the taxpayer uses a private subscription telephone in his business, the expenses related to the telephone should be settled on the basis of billing. Due to the fact that the contract was not concluded for a company but for a private person, the fee for the telephone subscription will not be included in the company's costs. If the entrepreneur uses a private telephone for business purposes, the so-called card, it is not possible to obtain call billings, and thus there are no grounds to include in the costs of company business calls.
To sum up, tax regulations do not exclude the possibility of using two phones in sole proprietorship. The entrepreneur bears the burden of proving that the expenses, which are recognized in tax costs, meet the conditions to be considered tax costs. The taxpayer may also use a private telephone in business and a business telephone for private purposes, provided that he properly documents the costs incurred.