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Could expenditure on occasional events/entertainments be tax deductible? |
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Is consuming of coffee, tea, sugar or milk by employees on the premises
of employer subject to VAT? Answers to the two questions are provided
by experts of Strategia Horwath Sp. z o.o.
Source: Tax newsletter - March 2007, Strategia Horwath Sp. z o.o.
Recently the tax offices have been more and more often stating that
expenditure on occasional events held for the employees may constitute
tax deductible costs. Nevertheless, as this is not a common practice of
the tax authorities as a whole yet, it is suggested to apply to your
tax office for an individual ruling.
Tax Chamber from Rzeszów in its ruling of 9.11.2006 (No
IS.I/2-4231/17/06) said that a taxpayer is allowed to include into his
revenue earning costs the expenses which do or may influence taxable
revenues and which are related with his economic activity.
The employee related costs, which, as a rule, are considered as tax
deductible, include expenses incurred upon occasional and integration
events organized for the employees. Such expenses, according to the Tax
Chamber, are closely associated with the economic activity run by
employer as they are aimed at integrating the employees with an
employer, helping to create good working relationships and atmosphere
and, as a result, at boosting effectiveness of work.
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Therefore, the expenses on such events, including outlays on food,
rental of space, etc. may be tax deductible, provided they are
financed from taxpayer’s his current financial means.
Similar attitude to the issue in question has been adopted by Tax Chamber from Opole (ruling of 19.09.2006 No PDI/4270-
0006/06/PK).
Is consuming of coffee, tea, sugar or milk by employees on the premises of employer subject to VAT?
A. Pursuant to art. 7 sec. 2 of VAT act, a taxable supply is
also application by a taxpayer of goods forming part of his business
for purposes other than those of his business, including purposes of
his private use or that of his staff – on condition that VAT on the
goods in question was wholly or partially deducted.
In a ruling of 24.02.2005 (No PP/443-8/05) tax office from Tomaszów
Lubelski stated that using up coffee and tea by employees on the
premises of employer is not liable to VAT, as it is associated with
employer’s business activity – it favours better effectiveness of
employees work. Therefore, there is no need to issue any internal VAT
invoices. |
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