Private trip combined with a business trip - settlement of expenses in costs

Service-Tax

In the event of an employee's business trip, the employer bears the expenses related to the business trip. However, there may be a situation where the employee extends his stay at the destination for private purposes. In connection with this situation, it is worth considering whether the entrepreneur retains the right to include the expenditure in the costs of business activity such a private trip combined with a business trip.

Purposefulness of an expense as a condition for recognizing it in tax costs

According to the general definition of the tax cost contained in Art. 22 sec.1 of the PIT Act, tax deductible costs are the costs incurred in order to achieve income or to maintain or secure the source of income, with the exception of the costs listed in art. 23.

Due to the general nature of the definition, each expense incurred by the taxpayer should be subject to individual analysis in order to qualify it in law. The taxpayer should examine the existence of a causal link between the cost incurred and the generation of income or the real chance of generating tax revenues, or the preservation or securing of the source of their receipt.

In other words, it means that the purpose for which it was incurred is essential for the legal classification of a given cost.

This means that there must be a causal link between the expense and the achievement of income, such that the incurring of the expense has an impact on the creation or increase of this income, as well as preserving or securing the source of income.

The possibility of qualifying a specific expenditure as a tax cost depends on a reliable and comprehensive assessment of whether the entrepreneur, at the time of making the expenditure, could and should have foreseen that the expenditure will contribute to the creation, preservation or securing of income.

It should also be remembered that the obligation to unequivocally demonstrate the cause and effect relationship between the expenditure incurred and the income obtained from the activity rests with the taxpayer. To put it bluntly, it is the entrepreneur that is burdened with the burden of proof in terms of proving that the incurred expense was a specific expense from the perspective of the company's needs.

There is no doubt that in the case of the general group of "employee costs", the expense is purposeful.

These costs include such expenses as basic salaries, all kinds of awards, bonuses and allowances as well as expenses related to improving the professional qualifications of employees. They also include expenses related to business travel and employee delegations. It can certainly be said that they are related to the business activity conducted by the taxpayer.

On the other hand, doubts arise when the employer's goals are combined with the employee's private goals. This is an unusual situation when an employee is sent on a weekly business trip and then stays there for another week on vacation. In such a case, does the employer lose the right to recognize the employee expenditure as costs?

Employee expenditure has a cause-and-effect relationship with the business activity conducted by the employer and, as a designated expenditure, it is a tax cost.

Definition of a business trip

The provisions of tax acts do not define the concept of business trips, therefore, in this respect, reference should be made to the regulations contained in the Labor Code.

Pursuant to Art. 77 § 1 of the Labor Code, an employee who, at the employer's request, performs a business task outside the place where the employer's seat is located or outside the permanent place of work, is entitled to receivables to cover the costs related to a business trip.

Pursuant to § 3 of this article, the conditions for the payment of these dues to an employee employed by an employer other than a state or local government unit of the budgetary sphere are specified in a collective labor agreement or in the remuneration regulations or in an employment contract, if the employer is not covered by a collective labor agreement or is not obliged to do so. to establish the remuneration regulations.

Basically, all business trips are related to earning income by the employer (entrepreneur). They are undertaken in order to carry out official tasks, and this, in turn, can be attributed to an intention, an intention to undertake them in order to obtain income by the company.

The presented provisions therefore show that the employer is obliged to incur expenses related to the employee's business trip, which means that the expenses incurred on a business trip are tax deductible.

Of course, it should be remembered that certain expenses cannot constitute tax costs due to the fact that they are not incurred for the business purposes of the employer-entrepreneur.

If an employee goes on a business trip related to the employer's income, the expenses related to the employees' business trips are tax-deductible.

Private trip combined with a business trip

Therefore, taking into account our considerations, it should be pointed out that when an employee goes on a private trip combined with a delegation, the employer may include only those expenses related to the company's needs as tax deductible costs. Consequently, the trader has to allocate proportionally.

Example 1.

The employee was sent on a weekly business trip to Spain. The next week he stayed there for a vacation. In this case, the entrepreneur may include the employee's expenses (accommodation, meals, transport, etc.) incurred only in the first week as tax costs.

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As we have already indicated in the introduction, it is possible that after achieving a business goal, with the consent of the employer, employees extend their stay for private purposes.

Doubts may arise as to the cost of travel to the destination. Entrepreneurs may wonder whether also in this case the expenditure should be proportionally divided, taking into account the length of private and business stay.

In this regard, it is worth referring to the interpretation of the IS Director in Warsaw of October 2, 2009 (No.IPPB5 / 423-414 / 09-4 / JC). The authority explained that the provisions of the tax law do not prohibit combining a business trip with a private trip. Therefore, the employer correctly classifies as tax deductible expenses expenses for the employee's business trip, including a return ticket, in a situation where, with the consent of the employer, the employee extended the business trip and incurred certain expenses for the duration of the private stay.

As can be seen in the described case, the entrepreneur may include in the costs the full value of tickets providing transport and return. It is not necessary to proportionally divide the expense.

Example 2.

The employee went on a week-long business trip to France. He spent another week there as a vacation. The cost of airline tickets is PLN 2,000. In these circumstances, the employer may charge the full value of the tickets. The entrepreneur does not have to use the key of proportionality of the business stay in relation to the entire period of the employee's travel.

The combination of a business trip with an employee's private rest does not constitute a premise that excludes the employer's right to include expenses for a business trip in tax costs. This rule also applies to the costs of transporting the employee to the destination.

Summarizing our findings, we can say that the expenses incurred by the entrepreneur on the delegation of an employee who combines his departure with a private stay may constitute a tax deductible cost.