Can a suit with the company's logo be counted as a tax deductible cost?
Entrepreneurs and employees, going to various types of business meetings or acting on behalf of the company, wear clothes specially purchased for this purpose - suits, suits - to serve a good image and create a positive image about the company. Later, taxpayers often face the problem of proper recognition of expenses for the purchase of such clothing in the company's books. They are faced with the problem of whether the cost of purchasing a suit can be counted as tax deductible costs, or maybe they are representation costs and thus are not included in tax costs?
Pursuant to 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 of the Act. Moreover, such costs must be properly documented. In Article 23 of the Act, the costs of revenues are excluded from, inter alia, costs of representation. This is important if you consider properly classifying a suit's cost as tax expense. There are often doubts as to whether such an expense should be included in the costs of representation.
Costs constituting tax deductible costs
In order for the expenditure on the purchase of clothing to be recognized as tax deductible costs, it must contribute to the promotion and advertising of the company, and thus to the company's revenue. It is customary to place a visible company logo on suits or employee outfits, which allows the customer to remember and identify a specific company. In such a situation, expenses for the purchase of suits or jackets can be classified as tax deductible costs. Such credit is allowed due to the fact that it is possible to demonstrate a relationship between the expenditure on the purchase of a suit and the achievement of income. By placing the logo, the entrepreneur can prove that the expenditure on business attire may have an impact on the recognition of the company, which in turn will allow you to attract new customers and increase sales. The condition for including the expenses for the purchase of a suit in the tax costs is the use of the suit during contacts with the company's customers.
Moreover, entrepreneurs have the habit of equipping their employees who have direct contact with the client with uniform clothes - uniforms. Such an outfit has two functions:
- identifying - thanks to the outfit, the client associates the brand and the company,
- advertising - thanks to the use of a logo on clothing.
The purchase of various types of outfits, including suits, must be individually considered in terms of the possibility of being classified as tax deductible costs. There are general reasons that will make it possible to include in tax costs, namely:
- There must be a cause-and-effect relationship between the expenditure on the purchase of official clothes and the achievement of income. This means that the incurred expense must have an impact on obtaining income or on the functioning of the company. The taxpayer should prove that the expenditure related to such an outfit may have an impact on the recognition of the company, which will allow for the acquisition of new customers, as well as an increase in sales;
- the lack of an appropriate corporate outfit may reduce revenues from the conducted activity or contribute to a less effective advertising of the company. This will result in a reduction in the dynamics of the conducted activity as well as a reduction in the achieved revenues;
- the obligation to wear a uniform results, for example, from the company's regulations;
- a corporate outfit can only be one that has permanent features characteristic for a specific company, e.g. logo, cut, color. Such permanent marking should be visible enough to be an element with an advertising function and unambiguously identify a specific company;
- an employee wearing such attire must have direct contact with the client.
In summary, if the purchased suits or other clothing will be:
- used only for business purposes,
- with the company's logo,
- serve the company's advertising,
- then the expenses for the purchase of such clothing can be included in the tax costs.
Costs not constituting tax deductible costs
The PIT Act excludes representation costs from tax deductible costs.The concept of representation has not been clarified in the law. Representation is defined as grandeur and lavishness in someone's way of life. which is related to the position, social position. In the case of a company, representation can be understood as speaking on behalf of the company, which involves grandeur in order to create a good impression about the company. Representation is understood as official contacts with contractors - meetings, receptions. Representation aims to create or consolidate a good image of the company.
Accordingly, if the entrepreneur has bought a business outfit, in this case a suit for meetings with clients, but without any advertising markings, such as a permanent logo, the cost of its purchase will not be included in tax deductible costs. The suit can also be used by the entrepreneur for personal purposes and it cannot be proved to what extent it is used for corporate purposes. If, on the other hand, the company logo is on the suit or other outfit, but the person will not have contact with the customer, the cost of purchasing this outfit will also not be recognized as tax deductible costs.