Employee benefits are tax-free

Service-Tax

In addition to traditional remuneration, employers provide employees with various types of benefits. As a rule, they should be taxed along with other remuneration components, but some of them are exempt. The article presents some examples of benefits for employees exempt from tax.

What is included in the employee's income - definition

Revenues from the service relationship, employment relationship, homework and a cooperative employment relationship are all kinds of cash payments and the monetary value of benefits in kind or their equivalents, regardless of the source of financing these payments and benefits, in particular: base salaries, remuneration for hours excess, various types of allowances, awards, equivalents for unused leave and any other amounts, regardless of whether their amount has been determined in advance, and in addition, cash benefits incurred for the employee, as well as the value of other unpaid benefits or partially paid benefits.

It follows from this definition that the employee's income includes not only the received money, but also the received benefits in kind, with the exception of benefits specified in the catalog of exemptions contained in Art. 21 of the PIT Act.

Tax-free employee benefits

Equivalents for the use of tools

Pursuant to Art. 21 sec. 1 point 13 of the PIT Act, as benefits for employees exempt from income tax, are cash equivalents for tools, materials or equipment used by employees during their work, which are their property.

Bearing in mind the above regulations, it should be stated that in order to take advantage of the aforementioned exemption, certain conditions must be met:

  • the equivalent must be paid in cash,

  • the equivalent amount should correspond to the expenses incurred by the employee, this means that the amount paid must correspond to the value of the used thing and be related to the degree of its wear,

  • tools, materials or equipment must be the property of the employee,

  • the employee's tools, materials or equipment must be used in the performance of work for the employer.

Only if the above-mentioned conditions are met, it is possible to take advantage of the exemption. This position is also presented by the tax authorities, as an example we can mention the letter of the Director of the Tax Chamber in Warsaw No.IPPB4 / 415-270 / 12-2 / JK2, of June 14, 2012, where we read:

(...) if the above conditions of the payment of the equivalent are met, and therefore the equivalent will be paid in cash and corresponds to the expenses incurred by employees in connection with the use of equipment, materials and tools (e.g. printers, photocopiers, office supplies, office furniture), which will constitute their property and these things will be used by employees to perform work for the employer, the paid equivalent will be exempt from personal income tax. (...)

The formal basis for determining the amount and payment of such cash equivalents should be a civil contract concluded between the employee and the employer - in writing. In the contract, the employee should certify that the tools, materials or equipment that will be used by him at work for the employer are his property.

Co-financing for glasses

The employer's duty is, inter alia, providing employees with eye-correcting glasses (contact lenses) in accordance with the doctor's recommendation, if the results of ophthalmic examinations performed as part of preventive health care show the need for their use when working with a screen monitor. This provision applies to employees using a screen monitor during work for at least half of the daily working time (§ 8 section 2 in conjunction with § 2 point 4 of the Regulation on occupational safety and health at workstations equipped with screen monitors).

If the results of ophthalmic examinations carried out as part of preventive health care show the need to use glasses when working with a screen monitor, the income obtained by the employee in the form of co-financing by the employer to the costs of purchasing glasses incurred by him is not taxed.

In certain situations, employees may receive income from the reimbursement of the purchase of corrective glasses (lenses). This will be the case if the reimbursement is granted as a result of a medical certificate issued following non-compulsory examinations. Such a position was presented by the Director of the Tax Chamber in Łódź in the individual ruling of March 4, 2014, IPTPB1 / 415-719 / 13-6 / DS:

(…) Due to the fact that the examinations performed cannot be considered as ophthalmological examinations as part of preventive health care (employees have valid medical examinations and have themselves requested the employer to conduct examinations in case of visual impairment), the costs of these examinations incurred by the Applicant, reimbursement purchase of eyeglasses correcting eyesight, ophthalmic lenses for already owned glasses and contact lenses will constitute an additional benefit for employees (…).

It is worth noting that the tax exemption of the amount of refund for glasses or lenses does not apply, for example, to contractors. Exempt from personal income tax are benefits in kind and equivalents for these benefits under the provisions on health and safety at work, if the rules for granting them result from separate acts or executive regulations issued on the basis of these acts (Article 21 (1) point 11 of the PIT Act). In the case of persons performing civil law contracts, such regulations do not exist.

Equivalent for washing clothes

Pursuant to Art. 21 sec. 1 point 11 of the PIT Act, the exemption applies to benefits in kind and equivalents for these benefits under the provisions on health and safety at work, if the rules for granting them result from separate acts or executive regulations issued on the basis of these acts.

Pursuant to the provisions of Art. 2377 of the Labor Code, the employer is obliged to provide the employee free of charge with work clothing and footwear that meet the requirements set out in the Polish Standards:

  1. if the employee's own clothing may be damaged or significantly soiled,

  2. due to technological, sanitary or occupational health and safety requirements.

The employer may establish positions where employees, with their consent, may use their own work clothes and footwear that meet the requirements of occupational health and safety.

The employer is obliged to ensure that the personal protective equipment used, as well as work clothing and footwear, have protective and functional properties, and ensure that they are properly washed, maintained, repaired, dedusted and decontaminated.

If the employer cannot ensure the washing of work clothes, these activities may be performed by the employee, provided that the employer pays a cash equivalent in the amount of the costs incurred by the employee.

Equivalents for washing clothes are exempt under Art. 21 sec. 1 point 11 of the PIT Act, according to which benefits in kind and equivalents for these benefits are exempt under the provisions on health and safety at work, if the rules for granting them result from separate acts or executive regulations issued on the basis of these acts.

Such a position was confirmed by the Director of the Tax Chamber in Katowice in letter No. IBPBII / 1 / 415-1155 / 13 / MK of March 31, 2014, which reads:

(…) from the provisions of the Labor Code, it is the employer who is obliged to wash, maintain, repair, dedust and decontaminate the personal protective equipment, clothing and footwear used, and if it is not possible to wash work clothes, pay an equivalent in the amount of costs incurred by employees, the amount of the equivalent money paid to employees, in the amount of costs incurred by them, is exempt from income tax under Art. 21 sec. 1 point 11 of the Personal Income Tax Act.

It should be noted that the amount of the allowance may also be determined in a different way than only on the basis of documents submitted by employees. As an equivalent, the amounts paid to employees are intended to compensate for the costs incurred by them. The amount of costs may be determined by mutual agreement of the employer and employees (…).