Non-obvious expenses as tax deductible costs

Firstly, it should be emphasised that one of the key criteria for recognising a particular expense as a tax-deductible cost is its connection to the business activity being carried out. Naturally, the expense must also be properly documented in accordance with tax regulations.

Generally speaking, tax-deductible costs are all reasonable and economically justified expenses related to the business activity, the purpose of which is to generate revenue or to secure or maintain a source of revenue, provided that such expenses are not excluded from these costs under specific provisions of tax legislation. Furthermore, the causal link between the incurrence of an expense and the generation of revenue, or the preservation or safeguarding of its source, must be assessed individually for each expense. Nevertheless, such a link should demonstrate that the expense incurred can objectively contribute to the generation of revenue or serve to preserve or safeguard the source of revenue.

What can be a tax-deductible expense?

Below is a list of non-obvious expenses which the Director of the National Tax Information Service has deemed eligible for deduction as tax-deductible costs.

Means of transport:

1. Bicycle (individual interpretation of 7 October 2022, ref. no.: 0114-KDIP3-1.4011.779.2022.2.AC).
2. Roller skates (individual interpretation of 25 January 2017, ref. no.: 1061-IPTPB4.4511.258.2016.1.MH).
3. Electric scooter (individual interpretation of 12 September 2019, ref. no.: 0113-KDIPT2-1.4011.321.2019.2.KU).
4. Unicycle (individual interpretation of 23 September 2022, ref. no.: 0111-KDIB1-1.4010.383.2022.2.SH).

In these cases, the validity of the expenditure was justified by the possibility of using alternative means of travel to and from the workplace or to meetings with clients, the optimisation of travel time, or the associated reduction in costs, e.g. fuel costs or parking fees.

Electronics:

1. Smartwatch (individual interpretation of 12 February 2021, ref. no.: 0115-KDIT3.4011.3.2021.1.KR).
2. Television (individual interpretation of 19 July 2021, ref. no.: 0115-KDWT.4011.191.2021.1.KG).
3. Games console (individual interpretation of 3 August 2023, ref. no.: 0111-KDIB1-1.4010.328.2023.1.KM).

In these cases, the validity of the expenditure was justified as follows:

• maintaining constant contact with clients during organised presentations, monitoring incoming calls and messages without interrupting the meeting, or quickly checking emails, thereby improving the response to enquiries;
• conducting presentations, organising video conferences, and participating in online meetings and hearings;
• using equipment in the relaxation area for employees and colleagues both during and outside working hours.

Accessories:

1. Watch (individual rulings of 9 May 2023, ref. no.: 0113-KDIPT1-2.4012.154.2023.4.SM and ref. no.: 0113-KDIPT2-1.4011.183.2023.4.AP).

In this case, in both interpretations, the matter concerned a lawyer who purchased a watch for the sole purpose of performing professional duties, including in particular measuring the duration of meetings for the purposes of accurate billing to the client in accordance with the agreed system.

KIS Director says ‘no’ to prescription glasses

When discussing interesting cases of expenses, mention should also be made of a specific expense such as prescription glasses.

However, in this case, the Director of the National Tax Information Service consistently refuses to recognise such an expense as a tax-deductible cost. For example, in the individual interpretation of 18 January 2023, ref. no.: 0115-KDIT3.4011.920.2022.1.AD, it was stated that whilst such an expense may obviously be related to the conduct of business, the purpose of prescription glasses is to safeguard the taxpayer’s health; therefore, it constitutes a personal expense linked solely to health and a vision impairment requiring correction, and thus to a circumstance independent of the business activity.

Unusual business costs – expenses versus costs

In summary, although some unusual costs in a business may be recognised as tax-deductible expenses, it is important that they are related to the business activity and that they are properly documented. Individual interpretations by the Director of the National Tax Information Service (KIS) are a valuable source of information for taxpayers, helping them to understand which expenses can be taken into account when settling tax. However, it should be borne in mind that they do not constitute a universally binding source of interpretation of the regulations; therefore, each expense must be considered on a case-by-case basis. If you are interested in issues such as expenses and costs or have any doubts regarding these matters, please make use of the services of HWW Hewelt Wojnowski Lindner i Wspólnicy.

Author

Piotr Magda

Radca prawny, Senior Associate

The practice includes ongoing advice on administrative and tax law. He has extensive experience in handling judicial, administrative, tax and judicial-administrative proceedings concerning both individual clients and business entities, including that gained through many years of providing services to local government units and other units of the public finance sector.

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