Family business - income and costs in a family business

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Running a business is associated with earning revenues and incurring costs. This also applies to companies run jointly by family members. Some income and expenses in a family business are subject to specific billing. More on that below.

A family business and income from free benefits

Running a family business often involves an entrepreneur using free help from family members and free use of private, family assets. In accordance with the applicable provisions of the Income Tax Act, these benefits constitute income from free benefits.

Art. 14 sec. 2 point 8 of the PIT Act

Income from business activity also includes the value of received benefits in kind and other gratuitous benefits, calculated in accordance with Art. 11 sec. 2-2b, subject to article 22. 21 sec. 1 point 125.


The method of measuring income from free benefits depends on the subject of the free benefits, as presented in the table below

The subject of the free service

Method of valuation of income from gratuitous benefits

Services falling within the scope of the provider's business activities

Prices applied to other customers

Purchased services

Purchase price

Provision of premises or building

Equivalent to the rent that would be payable in the event of concluding a lease agreement for this premises or building

Other cases

Market prices used in the provision of services or the provision of items or rights of the same type and species, taking into account in particular their condition and degree of wear as well as the time and place of making available


Importantly, if the benefits are partially payable, the income will be the difference between the value of these benefits, determined according to the rules set out in the table above, and the fee paid by the taxpayer.

Important!

Pursuant to Art. 21 sec. 1 point 125 of the PIT Act, income from free benefits is tax-free when these benefits are received from persons included in tax groups I and II:

  • Tax group I - spouse, descendants, ascendants, stepson, son-in-law, daughter-in-law, siblings, stepfather, stepmother, in-laws;

  • Tax group II - descendants of siblings, siblings of parents, descendants and spouses of stepchildren, spouses of siblings and siblings of spouses, spouses of siblings of spouses, spouses of other descendants.


Example 1.

The entrepreneur uses the help of his spouse, who acts as a secretary, to run the business. In this case, will there be income from gratuitous benefits and will it be taxed?

Income from free benefits will arise, but it will be tax-free.

Remuneration of family members versus income and costs in a family business

Pursuant to Art. 23 sec. 1 point 10 of the PIT Act is not considered to be tax deductible costs of the taxpayer's own labor value, his spouse and minor children, and in the case of conducting business in the form of a company that is not a legal person - also spouses and minor children of the partners of this company.

Important!

Remuneration of other family members (apart from the remuneration of the spouse and minor children) may be tax deductible.


Example 2.

The entrepreneur employs a wife, daughter-in-law and father-in-law in the company. The gross wages of these employees are as follows:

  • daughter-in-law's remuneration PLN 2,500,

  • wife's salary PLN 4,500,

  • father-in-law's remuneration PLN 2,500.

Which of these salaries can be classified as tax deductible costs?

Pursuant to the provisions of the PIT Act, an entrepreneur may only count as costs the remuneration of the daughter-in-law and the father-in-law. The wife's salary is excluded from the catalog of costs that may constitute tax deductible costs.

Important!

The regulations do not impose any restrictions on the settlement of costs related to employment of family members other than remuneration.

Social security contributions of people cooperating in the costs of a family business

Pursuant to the Act on the social insurance system, a cooperating person is understood as the spouse, own children, children of the other spouse and adopted children, parents, stepmother and stepfather, adoptive parents, if they stay with them in a common household and cooperate in the conduct of business or the performance of an agency contract, or contract of mandate.

Social security contributions paid for a cooperating person on the basis of the same rules as entrepreneurs can be accounted for in company costs:

  • social contributions - can be accounted for directly in tax deductible costs (col. 13 KPiR - other expenses) or deducted from income when calculating advance income tax. More on this subject in the article: Social security contributions - two methods of settlement;

  • health insurance contribution - 7.75% of the calculation basis for this contribution should be deducted from the tax (9% of the calculation basis is payable), in accordance with art. 27b of the PIT Act;

  • contribution to the Labor Fund - the contribution should be shown directly in tax deductible costs on the date it is paid.

Property of family members in a family business

According to the PIT Act, fixed assets are assets that:

  • they are owned or jointly owned by the entrepreneur,

  • are complete and serviceable,

  • will be used for corporate purposes,

- with an expected useful life of more than 1 year.

Thus, the issue of ownership of the assets that the entrepreneur wants to introduce into the company is extremely important. Because fixed assets cannot be assets that are not owned or jointly owned by the taxpayer. Thus, machines, cars, equipment and other tangible assets owned, for example, by father, son, grandmother, cannot be entered into the fixed assets register.

Important!

The property that is not owned or jointly owned by the taxpayer may be used in the company on the basis of a loan agreement.


In the case of assets which the entrepreneur is a co-owner of, it is possible to classify them as the company's fixed assets. Then the initial value of such a fixed asset is determined based on the share in joint ownership. When the asset is a spouse's joint ownership and is used in the company only by one of the spouses, then the initial value is determined in full.

Important!

In the case of an asset constituting joint ownership of spouses, which is used for separate activities of each spouse, the initial value is determined in proportion to the share in the property.