Employee benefit - is it taxable?
Employers often help employees who find themselves in a difficult life situation. This assistance can take various forms, and a popular type is allowances. Accounting for them on the basis of income tax may be different, as it may be taxable or exempt from tax.
Pursuant to Art. 12 of the PIT Act, income from employment is considered to be all kinds of cash payments and the monetary value of benefits in kind or their equivalents, regardless of the source of financing these payments and benefits, in particular: basic salaries, overtime remuneration, various types of benefits, awards, equivalents for unused leave and all other amounts, regardless of whether their amount has been predetermined, as well as cash benefits paid for the employee, as well as the value of other gratuitous or partially paid benefits.
However, not all cash payments and transferred benefits in kind constitute employee taxable income. Some of them benefit from income tax exemption under Art. 21 of the PIT Act.
And so, according to Art. 21 sec. 1 point 26 of the PIT Act, the allowances received in the event of individual random events, natural disasters, long-term illness or death are exempted up to the amount not exceeding PLN 2,280 in the tax year, with certain exceptions.
The allowance is understood as a one-time benefit (usually in cash) for a person who suffered a loss or was otherwise in a difficult life situation as a result of random events.
As the practice of economic life shows, benefits are paid out for many titles. Employers often have doubts as to whether a given employee benefit benefits from the dismissal, below we present the most common ones.
A child's sickness benefit to employees
As indicated by the tax authorities, the allowance for employees benefits from the exemption when it is paid with the employee's child's illness. However, for evidence purposes, it should be certified with appropriate documents, i.e. an appropriate medical certificate confirming the child's long-term illness, a certificate of the child's disability and name invoices for drugs from the pharmacy.
By long-term disease is meant a disease that requires long-term treatment, either continuously or over a long period, and has a long course. When analyzing whether the disease is long-term, it is impossible to refer to the specific time frame determining how long it is to last so that the allowance paid in connection with this disease can be exempted from taxation. From a medical point of view, long-term diseases are "chronic, incurable, congenital" diseases.
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The authorities also confirm that such allowances are exempt, an example of which is the letter of the Director of the Tax Chamber in Katowice of October 31, 2014, file ref. IBPBII / 1 / 415-632 / 14 / MK:
"(...) the disease diagnosed in the employee and her child, ie" perennial allergic rhinitis ", is - despite the Applicant's statement that" perennial allergic rhinitis "is not a long-term serious disease - a long-term disease. From the provision of art. 21 sec. 1 point 26 it does not follow that a long-term disease would be a serious long-term disease. Therefore, the non-returnable aid in the amount of PLN 300 paid to the employee in connection with a long-term illness of her and her child from the resources of the company's social benefits fund is exempt from income tax pursuant to Art. 21 sec. 1 point 26 of the Personal Income Tax Act (...) ”.
Flooding the employee's apartment
In our opinion, the payment of the allowance in connection with flooding the apartment may benefit from the exemption. However, the tax regulations do not specify the meaning of the term "individual random events" used. Random events should be understood as all sudden, unexpected single events caused by external causes, which cannot be predicted, and which are independent of the human being, even with due diligence. Undoubtedly, the death of a family member meets the conditions for qualifying as an individual random event, and therefore may benefit from the exemption.
This position was confirmed in the individual interpretation of August 1, 2013, file ref. ILPB1 / 415-619 / 13-2 / AG, Director of the Tax Chamber in Poznań, in which we can read:
“(...) the allowance paid from the resources of the Company Social Benefits Fund due to the difficult life situation in which the employee found himself as a result of individual random events, is exempt from income tax pursuant to Art. 21 sec. 1 point 26 of the Personal Income Tax Act, up to the amount specified in that provision, i.e. up to PLN 2,280. Therefore, the Applicant, as a payer, is not obliged to calculate, collect and pay an advance on income tax on this account to the above-mentioned heights (...) ".
Surplus over PLN 2,280
If the allowance paid exceeds the amount of PLN 2,280, the surplus over PLN 2,280 of the allowance received by the employee is treated as income from the employment relationship and is taxed according to general principles. The employer should charge this amount with an advance tax and show the described income in the PIT-11 declaration.
This position is also confirmed by the tax authorities, as an example we can mention the letter of the Head of the Tax Office in Katowice of April 11, 2005, No. PD III / 415-8 / 05, in which we read:
"(...) In accordance with the currently binding wording of Art. 21 sec. 1 point 26 of the Act of July 26, 1991 on personal income tax (Uniform text: Journal of Laws of 2000, No. 14, item 176, as amended), allowances received in the case of individual random events are free from income tax , natural disasters, long-term illness or death - up to the amount not exceeding PLN 2,280.00 in the tax year, subject to points 40 and 79 of the Act. At the same time, it should be noted that the above-mentioned wording of the provision shall apply from January 1, 2004. In the current wording of Art. 21 sec. 1 point 26, the legislator does not differentiate the allowance for tax purposes depending on the sources of their payment, so the applicant reasonably assumed that the amounts of allowances paid to the employee in the tax year are summed up, and the surplus over PLN 2,280.00 is subject to personal income tax (...) ".