Tax deductible costs - exclusions part II

Service-Tax

Car expenses

Depending on the type of car and whether it is the company's property or not, it depends, among other things, on what costs related to it can be counted as tax deductible costs.

Expenses exceeding the mileage limit

If a private passenger car is used for business purposes, a log of the vehicle mileage must be kept. It results in a limit of expenses that can be included in company costs, which is calculated on the basis of kilometers traveled and the rate per 1 km of vehicle mileage specified in the regulations. Therefore, it is possible to include in tax deductible costs only those expenses that fall within the limit calculated cumulatively from the beginning of the year. The excess of expenses (as well as the excess of the limit over the expenses incurred) cannot be considered a cost.

Car insurance premiums

Pursuant to Art. 23 (1) (47), passenger car insurance premiums in the amount exceeding their part determined in such proportion as the equivalent of EUR 20,000 in the value of the car assumed for insurance purposes cannot be considered a tax cost. Conversion into zlotys is made according to the selling rate of foreign currencies announced by the National Bank of Poland on the date of conclusion of the insurance contract. AC insurance premiums are a popular example.

The cost of repairing the car without AC

Losses resulting from the loss or liquidation of cars and the costs of their post-accident repairs are not considered tax deductible costs, if the cars were not covered by voluntary insurance (Article 23 (1) (48)). Therefore, an entrepreneur who has not taken advantage of voluntary AC insurance covering the vehicle will not be able to count the expenses related to the repair of damage resulting from an accident as costs.

There may also be an interesting case where the costs of repairing a vehicle cannot be counted as tax costs when its damage was caused by a driver who was driving under the influence of alcohol. This position is confirmed by the judgment of the Supreme Administrative Court of June 1, 2011 (file reference number II FSK 75/10), which concluded that "(...) it is a loss caused by the taxpayer by intentional or even criminal act or omission (...)".

The taxpayer is not entitled to include the fee for collecting the towed car as tax costs. It does not result directly from the regulations, but it is a sanction fee, and in accordance with Art. 23 sec. 1 paragraph 50 - they are not tax deductible.

Entrepreneur-related expenses

When running a business, the taxpayer also incurs expenses directly related to his needs. However, it is worth remembering that not all expenditures that at first glance seem to be eligible for tax costs do not actually have this option.

Individual economic activity

When running an individual business and not employing employees, the entrepreneur cannot count as the costs of expenses incurred for the purchase of food products and detergents, e.g. soap or paper towels. The tax authorities may decide that these components are not used for the purposes of the conducted business activity, but serve the personal purposes of the taxpayer.

Expenses serving personal purposes

Pursuant to Art. 23 section 1 point 49, expenses incurred for the purchase of gradually consuming tangible assets of the enterprise, not included in fixed assets in accordance with separate regulations - if it is found that these components are not used for the purposes of business activity, but are used for the personal purposes of the taxpayer, employees or other persons, or are located outside the company's premises without justification.

Glasses and corrective lenses

Providing the employee with glasses or lenses is in some cases the responsibility of the employer. An entrepreneur may include as costs the cost of purchasing glasses for an employee who works at a position equipped with screen monitors and when:

  • employees use a screen monitor during work for at least half of the daily working time,
  • the need for glasses will be demonstrated by the results of ophthalmological examinations carried out by a doctor as part of preventive health care.

In other cases, the expense for the employee's glasses cannot be considered an expense.

The situation is different in the case of glasses for entrepreneurs, because the indicated expenditure is of a personal nature unrelated to the conducted business activity. The confirmation of the above is the individual interpretation of the Director of the Tax Chamber in Bydgoszcz of February 10, 2009 (ref. ITPB1 / 415-790 / 08 / AK), which clearly states that “(...) the expenditure on the purchase of corrective glasses is to protect his health. Expenses related to the health condition of a self-employed person are expenses of a personal nature. (...) the immediate goal of incurring this type of expenditure is to protect the eyesight, and not to generate income from non-agricultural economic activity.Incurring expenses for the purchase of glasses has no real impact on the amount of revenues obtained from the provision of services performed as part of the conducted business activity, or on the relationship with the conducted activity as a source of revenues. (...) ”.

Private transfers from a company account

The taxpayer making private transfers from the company's bank account is not entitled to include commissions on these transactions as tax deductible costs. It may, however, include as costs those bank charges that are related to the conducted business activity.

Expenditure on workwear and entertainment

Entrepreneurs and employees are bound by health and safety regulations. Therefore, they are obliged to protect health and life by ensuring safe and hygienic working conditions, with appropriate use of the achievements of science and technology. However, the purchase of workwear cannot be taxed solely on the basis of the document specifying its type. A condition must be met where the nature of the activities performed require its use and proof that the use of protective clothing is necessary to secure the work performed.

The situation is different in the case of expenditure on representative clothing, e.g. a suit, tie, shirts, suits or elegant shoes. As they are related to the appearance of the taxpayer, they are recognized by the tax authorities as a personal expense or representation cost, which cannot be classified as tax deductible costs. It is true that the appearance in practice is very important when dealing with clients, but it is only an element of good manners, and thus - does not meet the definition of a tax cost.

Motorcycle clothing

The issue of motorcycle clothing of entrepreneurs using a motorcycle in their business is quite unclear, as there are different interpretations regarding this issue. Opinions are divided, because some tax authorities consider expenses of this type to protect the health of entrepreneurs - they are personal in nature, and others believe that nowadays driving a two-wheeler requires the taxpayer to use such "protective" clothing.

The Director of the Tax Chamber in Warsaw, who in an individual interpretation of July 10, 2009 (IPPB1 / 415-454 / 09-2 / AG), stated that “(...) the expenditure incurred for the purchase of motorcycle clothing in this case is neither directly nor indirectly related to the achievement of revenues or the preservation or securing of the source of revenue. The immediate goal of the purchase of protective motorcycle clothing for riding a motorcycle is to protect the user's health, and the expenses incurred for health protection are expenses of a personal nature ”.

The Provincial Administrative Court in Szczecin found in its judgment of April 20, 2011 (file reference number I SA / Sz 60/11) that the non-recognition of motorcycle clothing expenses as a tax cost is unjustified and incomprehensible. In his opinion, the current times require drivers to use specialist clothing with reinforcements while driving, taking into account lower temperatures and the possibility of road accidents. It also claims that "(...) safety rules require that a motorcyclist be dressed in clothing specially adapted for riding a motorcycle (...)", which in turn may lead to the conclusion that “(...) expenditure on the purchase of specialist (protective) motorcycle clothing is related to the revenues generated, the more so as motorcycle clothing differs significantly from standard clothing. (...) ".

Education expenditure

It very often happens that entrepreneurs want to broaden their knowledge by going to university or participating in additional training. However, it is important to be able to count the expenses incurred on education, they must be related to the conducted activity. Therefore, the knowledge gained during learning must be useful and used in the enterprise.

But what if the scope of education does not fit within the scope of the company being run? Unfortunately, each case must be considered individually, because often studies, training or courses may contribute to the willingness to expand the scope of activities performed in the enterprise. The tax authorities were favorable to the issue of including expenditure on entrepreneurial education as tax deductible costs. However, a different opinion was expressed by the Tax Chamber in Warsaw (No.IPPB1 / 415-575 / 13-2 / AM) in the interpretation concerning the expenses for doctoral studies of the attorney who is a patent attorney, considering the applicant's explanations insufficiently justified, which in effect did not allow the taxpayer to count the indicated expense to tax deductible costs.

As can be seen from the above situation, each case of an entrepreneur's training must be considered individually, because it is under the obligation to justify the relationship between education and business activity. In unclear situations, a good solution may be to apply for an individual interpretation to the tax chamber.

Entrepreneur's life insurance

Both the entrepreneur and the employees are exposed to various types of accidents during their activities. In such a case, it could be considered that the taxpayer's life policy is a financial security for a significant source of income for the activity, which is the entrepreneur's own work. Unfortunately, in the opinion of the tax authorities, he has no right to include the outlays incurred for the purchase of insurance as corporate costs.

Despite the fact that the entrepreneur's life insurance policy has not been included in Art. 23 and the funds obtained from insurance could be used as a result of an accident at work for the day-to-day maintenance of the company, but they cannot be included in tax costs. This is because, according to the tax authorities, it is uncertain whether the funds received will be actually used for the maintenance of the enterprise, or perhaps for the protection of the entrepreneur's health, e.g. rehabilitation. In such a case, the expense will be the cost incurred for personal purposes.

Confirmation of this issue may be the individual interpretation of September 10, 2010 of the Director of the Tax Chamber in Poznań (No. therefore, it leads to the situation that it cannot be a corporate cost.