Training for contractors and VAT - you should know about it

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Companies, in order to encourage the purchase of their products and their subsequent sale by their contractors, very often organize trainings to familiarize themselves with the goods sold. The question is how to account for such training for contractors?

According to the general rule, only those expenses that affect the achievement of income or the preservation or protection of the source of income may be tax costs. In addition, the expense cannot be included in the catalog of expenses that are not deducted from tax deductible costs. Therefore, tax deductible costs are all rationally justified expenses related to the conducted activity, the purpose of which is to achieve, secure and maintain the source of income; however, when determining tax deductible costs, each case, except for those clearly indicated in the Act, requires an individual assessment in terms of a direct relationship with revenues and rationality of actions to achieve revenue.

Undoubtedly, the expenditure on training for contractors, during which participants are provided with specialist knowledge about products, regarding their properties, possible applications, method of assembly or use of specific goods, meet the indicated conditions. The training covers such issues without the knowledge of which the sale of the taxpayer's products by the contractor would be impossible or less effective. Therefore, training generally has a positive impact on the value of the taxpayer's revenues - it contributes to increasing or maintaining sales at a certain level.

As a consequence, expenses for training incurred may constitute a tax deductible cost. This position is also confirmed by the tax authorities, as an example we can mention the letter of the Director of the Tax Chamber in Łódź of April 27, 2012, No.IPTPB1 / 415-84 / 12-2 / DS, in which we can read:

(...) the legal qualification of expenditure on the organization of a training trip requires an assessment of whether the training organization shapes the demand for the distributed goods of the Applicant's company, or whether it serves to build relationships with contractors and create the best possible impression. Therefore, in a situation where the main goal of the organization of the training trip was to raise the knowledge of recipients about the goods offered by the Applicant's Company and training of participants in the techniques of selling these goods, and the number of participants was not the result of their selection (referred to below), the expenses for the organization of this training trip can be counted as tax deductible costs (...).

Meals during training

During training, meals or a small snack are often served. As a rule, they can be included in tax costs, however, one should remember about the limitation regarding representation, because representation costs, in particular incurred for catering services, purchase of food and beverages, including alcoholic beverages, are not considered tax deductible costs.

Tax regulations do not contain a definition of representation. Therefore, the definition contained in the "Dictionary of the Polish language by PWN" (Warsaw 1981) should be used - representation means grandeur, refinement in someone's way of life related to the position or social position. On the other hand, according to the definition established in jurisprudence - representation is all activities consisting in creating and consolidating a good image of the company.

The tax authorities also use the dictionary definition of representation, as an example we can mention the letter of the Head of the Łódź Tax Office in Łódź of March 28, 2007, no. ŁUS-II-2-423-12 / 07 / AG, in which we can read:

(…) In accordance with applicable from 01.01.2007. the wording of Art. 16 sec. 1 point 28 of the above-mentioned act shall not be considered as tax deductible costs of representation costs, in particular costs incurred for catering services, purchase of food and beverages, including alcoholic beverages.

Due to the lack of a statutory definition of the term "representation", a linguistic interpretation should be used. According to the dictionary of the Polish language (PWN, Warsaw 1981) the term "representation" means grandeur, refinement in someone's way of life related to the position or social position. In tax practice, the view that representation is based on official business contacts with other entities, during which delegations or contractors are admitted, participates in receptions related to the stay of delegations or contractors, has become established. Therefore, these are activities aimed at presenting the company in the most positive way for current and future customers.

According to the definition established in the jurisprudence - representation is all activities consisting in creating and consolidating a good image of the company, eg company decor, logo (...).

Therefore, if the meals are not sumptuous, there are no obstacles to include them in tax deductible costs. This position is also confirmed by the tax authorities, an example of which is the letter of the Director of the Tax Chamber in Poznań of January 15, 2014, no. ILPB3 / 423-501 / 13-2 / JG, where we can read:

(…) The description of the substantive scope of the meetings organized by the Company clearly shows that their course does not assume building the image of the Company, but focuses on the core business of the Company, which is the sale of products. The expenses related to refreshments for their participants are not their sole or dominant purpose. They are of an accessory nature and are given only to meet the natural, basic physiological needs of the participants of these meetings. These are meals customary in the realities of economic life. This allows participants to focus on the substantive - the right side of these meetings, which concerns activities supporting the sale of products by the Company for which these meetings are organized. Therefore, they should be considered a tax deductible cost. There is no doubt that creating the right climate for the activities carried out during these meetings, aimed at the core activity of the Company, which is the sale of products, results in the achievement or increase of income (...).

Training for contractors and accommodation

Also, the tax authorities do not question the possibility of including the accommodation costs provided to clients during training courses as costs. Such a position was confirmed by the Director of the Tax Chamber in Łódź in a letter of 27 January 2014 no.IPTPB3 / 423-461 / 13-2 / PM, in which we can read:

(...) it should be stated that expenses, i.e. costs of stay (accommodation), food costs, refreshments in the form of: coffee, tea, cookies, as well as food provided by a catering company (catering), provided during trainings for entrepreneurs and employees of the Company, consumed at the registered office of the Company, are not excluded from tax-deductible costs pursuant to Art. 16 sec. 1 point 28 of the Corporate Income Tax Act. These expenses are incurred in connection with the product training conducted by the Applicant, the purpose of which is to increase the efficiency of sales of goods produced by the Company and to familiarize entrepreneurs-owners of construction stores and wholesalers as well as people managing construction departments in DIY stores with the methods and conditions of proper installation of windows and chimney hatches manufactured by the Company. The aim of these trainings is therefore not only to create a good image of the Applicant's company or to create positive relations with contractors. Expenses incurred for the purchase of the above-mentioned food products and catering services meet the conditions under Art. 15 sec. 1 above laws; they are incurred in order to generate income or to maintain or secure the source of income, thus may be classified as tax deductible costs (...).