An entrepreneur's business trip allowance with tax deductible costs
When thinking about a business trip, one may wonder if the entrepreneur's trip differs in any way from the employer's trip. The Personal Income Tax Act does not explicitly explain the concept of a business trip, neither for an employee nor an employer. In Polish legislation, one can only find the concept of an employee's business trip, which is included in the Labor Code. Pursuant to the Code, a business trip is deemed to be performing a task outside the place where the employer is based or outside the permanent place of work, and this task is performed on the basis of the employer's order. A business trip of an employee and an entrepreneur is governed by different laws.
Entrepreneur's business trip
The employee's business trip must not be confused with that of the employer. The main difference is that the employee's travel destination is determined by the employer in the departure order, while in the case of the entrepreneur there is no such order and the entrepreneur himself determines the purpose of his trip. On what basis can an entrepreneur's trip be considered a business trip?
In order for the entrepreneur's trip to be considered a business trip, the following conditions must be met:
- travel related to the conducted business activity,
- the journey must be for the purpose of generating income or maintaining or securing a source of income.
In addition, the entrepreneur's business trip allowance must be within the limits specified in separate regulations.
The amount of the allowances due to the entrepreneur
Pursuant to Art. 22 of the PIT Act, the tax deductible costs do not include the value of per diems for business trips of business persons and persons cooperating with them - in the part exceeding the amount of per diems due to employees, specified in separate regulations issued by the competent minister. The amount of the allowances is determined by the ordinance of the Minister of Labor and Social Policy. Currently, the rate for one day of domestic travel is PLN 30 (previously PLN 23). To sum up, in accordance with the regulations, an entrepreneur may include expenses for a business trip as tax deductible costs, but only up to a certain limit that employees are entitled to.
When determining the amount of the diet, the length of the journey should be taken into account. The rates are as follows:
- for journeys lasting no longer than one day:
- from 8 to 12 hours - half of the diet;
- over 12 hours - full-amount diet.
- for a trip longer than a day:
- for each full day - full diet;
- for a day started and lasts more than 8 hours - a diet in full amount;
- for a day started, lasting up to 8 hours - half of the diet
Other business travel expenses included in tax deductible costs
In addition to the value of the allowances, the entrepreneur has the right to include other expenses incurred during a business trip related to:
- by car entered in the fixed assets register (fuel, highway tolls, parking),
- by car not entered into the fixed assets register (up to the limit resulting from the vehicle mileage register),
- travel by other means of transport: by train, plane, coach, ship,
- by taxi and public transport.
Accounting for accommodation and travel expenses differs for the employee and the employer. The employee is entitled to certain lump sums for accommodation and travel, if the employee does not have the appropriate bills. However, in the case of an entrepreneur, in order for the expenses to be classified as tax deductible costs, they must be properly documented: with invoices, bills or tickets. In the case of invoices for accommodation, the entire gross amount is included in the tax deductible costs, as VAT cannot be deducted from this type of service. When it comes to travel, the tax deductible costs include all expenses confirmed by invoices, e.g. for fuel and taxis (or a bill), receipts or bills for highways and parking lots, or tickets or invoices for train journeys.
Please note that representation expenses cannot be included in the costs. This applies mainly to catering services, the purchase of food and beverages, including alcoholic drinks.