Employer's training financed by subsidies from KPiR
In the crowds of the ever-changing market, entrepreneurs often use foreign capital to take out loans or take advantage of the possibility of financing through subsidies, which they use for enterprise development, employee training or self-development. As far as employee training is concerned, it is mostly considered a corporate cost, but training intended for the employer must be properly justified. The question then arises here, when and whether subsidies for training an employer in the KPiR can be considered a tax cost at all?
Does receiving a grant constitute income?
Pursuant to Art. 14 sec. 2 point 2 of the PIT Act, income from business activity also includes subsidies, subsidies, subsidies and other paid benefits that are intended to cover costs, except for those related to the purchase or production of fixed assets or intangible assets, from which it is made depreciation write-offs.
However, further in the content of the act in Art. 21 sec. 1 lists the revenues that are free from income tax, including:
one-off measures allocated to setting up an activity (paragraph 121);
subsidies received from the state budget or the budgets of local government units (point 129);
funds and payments received with European funds (paragraph 137).
The above provision implies that the obtained subsidies from EU funds or the state budget do not constitute taxable income and therefore should not be included in the KPiR.
When does the received employer's training subsidy constitute income?
In fact, there is a certain exception to the above rule, which is a subsidy received from the Labor Fund, of which, for example, the National Training Fund is a part.
As it results from the individual interpretation issued by the Director of the Tax Chamber in Bydgoszcz of April 29, 2015, ref. No. ITPB2 / 4511-91 / 15 / MK:
„(...) the KFS subsidy received on the basis of the provisions of the Act on the promotion of employment and labor market institutions does not meet the conditions for exemption from taxation referred to in Art. 21 sec. 1 point 114, point 118 or point 129, as well as in other provisions of the act on personal income tax.
As a consequence, the subsidy paid from KFS constitutes for the Applicant income from non-agricultural business activity within the meaning of Art. 10 sec. 1 point 3 of the act on personal income tax, which is subject to taxation on the principles applied in the course of its business activity.”
It follows from the fact that the income obtained from the KFS subsidy is not included in the subsidies received from the state budget, nor in the EU funding, and therefore it is taxable income, which should be shown in column 8 - Other revenues in the KPiR.
Is the employer's training subsidy a cost?
According to Art. 22 sec. 1 of the PIT Act, "tax deductible costs are costs incurred in order to generate income or to maintain or secure a source of income, except for the costs listed in Art. 23 ". Tax deductible costs may not be an expense of a personal nature for the entrepreneur. Therefore, if the employer adequately justifies the correctness of the training and that it was related to the nature of the conducted activity, it may recognize it as a tax deductible cost.
EU subsidy for employer's training
Pursuant to Art. 23 sec. 1 point 56 of the PIT Act "expenses and costs directly financed from income (revenues) referred to in Art. 21 sec. 1 points 29b, 46, 47a, 47d, 116, 122, 129, 136 and 137 ”. It should be understood that any expenses financed entirely from the EU subsidy do not constitute a tax deductible cost.
Mr. Piotr received a subsidy from the European Union for business development. Pursuant to the subsidy agreement, he could allocate the funds received for specialist training, thanks to which he would be able to perform the activities necessary to conduct his business. Should Mr. Piotr, therefore, include such operations in the KPiR?
No, the EU subsidy received will not constitute income, and the training financed with it will not be a cost. Therefore, Mr. Piotr will not show such an economic event in the KPiR.
KFS subsidy for employer's training
The taxpayer receiving co-financing from the KFS should include it in operating revenues. Likewise, expenses financed from the KFS subsidy will also be the cost of the entrepreneur.
This is a direct consequence of the fact that Art. 21 sec. 1 point 121 of the PIT Act was not listed in the catalog of non-tax deductible expenses, Art. 23 of the PIT Act. Art. 21 sec. 1 point 121 speaks of one-off subsidies for starting an activity granted from the Labor Fund, which means that expenses financed from the Labor Fund may constitute tax deductible expenses, provided that they were not intended for the purchase of fixed assets or intangible assets which are subject to depreciation.
XYZ has received a grant from KFS to train employees and entrepreneurs. Therefore, can such co-financing be shown in the KPiR?
Yes, co-financing for training should be shown on the revenue side in col. 8 - other revenues, and the expenditure financed from the subsidy should be included in col. 13 - other expenses in the KPiR.
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Subsidy for training the employer partially financed by the entrepreneur
If the entrepreneur will only partially finance the training costs from the subsidy, and partially from his own funds, their recognition will depend on whether the expenses incurred will be financed from the EU subsidy or the Labor Fund.
The training, which was partially financed from the subsidy from the Labor Fund, and partially from the entrepreneur's own funds, may be fully included in the costs, while if the training was financed partially from the EU subsidy, the taxpayer will be able to include only a part of the expenditure as costs, which was paid for by him.
In January, Mr. Zdzisław received funding from the employment office for the training that took place in the same month, but the funds received allowed only 70% of the training to be covered, therefore he covered the remaining 30% from his own funds. How should this be shown in the KPiR?
As the received subsidy was allocated from the Labor Fund, Mr. Zdzisław will be able to fully cover the costs of the training in col. 13 - other expenses. On the other hand, the subsidy from PUP does not constitute taxable income, so it should not be included in the KPiR.
Ms Zofia received a grant from the EU in the amount of PLN 17,000. The received subsidy was allocated to the training, the cost of which was PLN 20,000, therefore Ms Zofia financed the remaining PLN 3,000 from her own funds. Will it be able to record the cost of the training?
In a given case, Ms Zofia will be able to include in costs only PLN 3,000 of the expenditure incurred, as the part financed from the EU subsidy does not constitute a tax deductible cost.
In summary, not all subsidies constitute taxable income, and not all subsidy-financed expenses may be considered tax deductible. The tax settlement of the funds received depends, inter alia, on on the type of subsidy, the way it is used by the entrepreneur and the relationship with the business.