VAT deduction on accommodation services


Due to the need to constantly adapt to market realities, both entrepreneurs and their employees must be mobile. The possibility of developing a company and acquiring new contractors is inextricably linked with the necessity of frequent trips and taking orders in various places in Poland or the world.

In connection with the above, there are more and more doubts regarding the settlement of business trips of employees, in particular when it comes to issues related to accommodation, and more specifically, the possibility of deducting VAT on this account.

Pursuant to Art. 86 sec. 1 of the act on tax on goods and services, an active VAT payer has the right to reduce the amount of tax due by the amount of input tax to the extent to which the purchased goods and services are used to perform taxable activities.

On the basis of the above provision, it can be concluded that incurring costs in connection with paying employees for accommodation during a business trip is a purchase made as part of business activity. Therefore, is the entrepreneur entitled to deduct input tax resulting from invoices for accommodation services?

Well no. As indicated in art. 88 of the VAT Act, reducing the amount or refunding the difference in output tax does not apply to accommodation services purchased by the taxpayer. Thus, the exclusion of the possibility of deducting VAT on accommodation services results directly from the act. Moreover, this provision imposing limitations on the right to deduct input tax is fully in line with EU law. As indicated in art. 176 of Directive 2006/112 / EC, the Member States of the European Union may maintain exclusions from the right to deduct tax on goods and services that were applied when a given country joined the Community. The exclusion of the right to deduct input VAT on the purchase of accommodation services was in force in Poland even before joining the European Union, therefore, in accordance with EU law, it may still be applied.

On the basis of the above, the entrepreneur, when purchasing the accommodation service, will not be entitled to deduct VAT resulting from the invoice, although this cost is closely related to the conducted activity. In this regard, the VAT Act imposes a restriction that excludes the possibility of using the deduction. The lack of the right to deduct input VAT will result in the necessity to pay a higher input tax, as the entrepreneur will not be able to reduce the output tax resulting from sales revenues by VAT charged on cost invoices (regarding expenses for accommodation) related to these revenues. The entrepreneur will be able to include the incurred expenses for accommodation in a gross amount in tax deductible costs. In this case, the non-deducted VAT constitutes a tax cost.

However, there is a chance for VAT deductions if the purchase of the accommodation service takes place in a so-called package, i.e. as a comprehensive service. If the accommodation service is only a component of a package covering a wider scope, i.e. several services are provided within one service, it is not possible to divide this service in terms of taxation. Thus, input VAT can be deducted from the comprehensive service, and this is the only case where such a possibility exists. In the event of a simple purchase of an accommodation service, the taxpayer is not entitled to a deduction.