Expenses related to the organization of training and VAT

Service-Tax

Entrepreneurs engaged in the activity of organizing training courses incur significant costs related to their preparation. The issue that raises problems are expenses related to the organization of training on the basis of VAT and income tax.

Tax deductible costs are all rational and economically justified expenses related to the conducted business activity, the purpose of which is to achieve, secure or maintain a source of income. The costs incurred should be assessed in terms of their purposefulness, i.e. the pursuit of income. In order for a specific expense to be considered a tax deductible cost, there must be a causal relationship between this expense and the achievement of income, such that the incurred expense has or could have an impact on the creation or increase of this income.

Therefore, any expenditure intentionally incurred with the intention of obtaining income, except for those clearly indicated in the catalog of expenses not recognized as costs, should be considered a tax deductible cost. The burden of proof of action for a specific purpose rests with the taxpayer.

Expenses related to the organization of training and taxes

In our opinion, there are no obstacles to include expenses related to the organization of training as costs, as they are related to generating income.

Also, the tax authorities do not question such a possibility, as exemplified by the letter of the Director of the Tax Chamber in Katowice, ref. No. IBPBI / 1 / 415-454 / 11 / ESZ, from July 26, 2011, where we can read:

(...) The description of the facts presented in the application shows that the Applicant incurs expenses related to the organization of training, seminars, conferences, advertising events for contractors (information and promotion or promotional and advertising activities), which include the expenses incurred for:

  • issuing invitations and office supplies,

  • the usual refreshments and the purchase of non-alcoholic beverages or the purchase of a catering service,

  • rental of the facility with a training room,

  • remuneration for the rental of technical equipment and preparation of training materials,

  • accommodation and insurance of participants,

  • lecturers' remuneration,

  • purchase of a comprehensive conference organization service (invoice issued by the organizer), including a catering service.

(...) In the light of the above provisions, it should be stated that the expenses incurred by the Applicant may be recognized as tax deductible costs for the business activity, provided that these expenses do not have the features of grandeur, lavishness, and their nature does not reflect the creation of a positive image. companies, i.e. shaping a better external perception of the company compared to business entities providing or offering similar services or products. It should be noted that activities whose main purpose is to improve the image of the entrepreneur, also constitute expenses included in the costs of representation, which may not constitute tax deductible costs of the conducted economic activity (...).

VAT deduction

The right to deduct applies to the extent to which the goods and services purchased by the taxpayer are used to perform taxable activities (Article 86 (1) of the VAT Act). On the basis of this provision, the deduction is subject to, inter alia, input tax on training services that are acquired in connection with taxable activity conducted by taxpayers.

However, from the rule set out in Art. 86 sec. 1 of the VAT Act, there are some exceptions. One of them concerns catering and hotel services. According to Art. 88 sec. 1 point 4 of the VAT Act, the reduction of the amount or the refund of the difference due to tax shall not apply to accommodation and catering services purchased by the taxpayer, except for the purchase of ready meals intended for passengers by taxpayers providing passenger transport services.

Concept "Catering services" for the purposes of applying the exemption in question, it is understood narrowly. The catering services covered by this exemption include only the services of restaurants and other catering establishments classified in group 56.1 PKWiU.

Thus, when providing training services and purchasing hotel and catering services, the entrepreneur is not entitled to deduct VAT. This position is also confirmed by the tax authorities, an example of which is the individual interpretation of the Director of the Tax Chamber in Warsaw of January 27, 2017, file ref. 1462-IPPP3.4512.801.2016.2.IG, where we can read:

(...) The applicant is not entitled to reduce the output tax by input tax resulting from invoices relating to the purchase of catering and accommodation (hotel) services, as the applicable provisions of both the VAT Act and the Directive do not allow such a deduction. In addition, the Applicant does not provide tourist services, but only the conference organization service, under which he / she purchases, inter alia, hotel and catering services.

Therefore, the Applicant's position that he is entitled to deduct the input tax from the invoices documenting the purchase of catering services and hotel services should be considered incorrect (...).

It is worth adding that the deduction of VAT would be due if the organizer purchased catering services. Catering services are very similar to catering services, but the tax consequences of purchasing them are very different. Due to the different nature of catering and catering services, it cannot be considered that the limitation of deduction of input tax will apply to catering services.

This position has been repeatedly confirmed by the tax authorities, the letter of the Director of the Tax Chamber in Bydgoszcz of April 28, 2008, no. ITPP2 / 443-118 / 08 / AP, which reads as an example:

(…) The catering service is a service separate from the catering service. In the provision of Art. 88 sec. 1 point 4 of the Value Added Tax Act, which excludes the right to deduct input tax, the legislator only mentioned catering services, thus the right to reduce input tax by input tax on the purchase of catering services was not excluded (...).