Tax-deductible cost - is it every expense?

Tax deductible costs are an extremely important aspect for entrepreneurs who keep a revenue and expense ledger. Thanks to them, tax optimization can be made. Before the taxpayer calculates his liability to the tax office for the sale, he may reduce his revenues by the costs incurred. What formalities should therefore be completed so that the expenditure can be considered a tax deductible cost?

The principle of recognizing an expense as a tax deductible cost

The basic principle according to which expenses can be considered tax deductible is the fact that they were incurred in order to obtain income or to maintain or secure the source of income. Additionally, the expense cannot be included in Art. 23 of the Personal Income Tax Act - this catalog lists all expenses that cannot become tax costs.

If the above condition is met, it will be necessary to properly document the transaction. As a rule, a taxpayer cannot recognize an expense in his book on the basis of his own declaration only. The regulations very strictly define when and what documents are considered reliable and correct evidence that the cost has actually been incurred.

The entrepreneur always has to prove the cost

Importantly, it is the taxpayer's responsibility to prove that a given transaction actually took place. That is why it is so important to store documentation in accordance with the statutory deadlines and in a specific manner. It is worth remembering that in the event of an inspection by the tax office, the entrepreneur is obliged to submit his documentation in such a way that all the evidence is legible, accessible and easy to find. When archiving in paper form, taxpayers usually have excellent skill in creating well-thought-out collections in folders or binders. Currently, however, it should also be remembered that some documents may be stored in electronic form, which may be a novelty for some entrepreneurs. It is therefore worth getting acquainted with the principles of proper archiving of e-documents in order to avoid excessive stress in the event of an inspection.

In addition, it is worth remembering when an expense actually becomes an expense. The mere fact of paying it does not always automatically include it in the costs. Such a situation takes place, among others when purchasing fixed assets or intangible assets. Even if the entire amount due has been transferred to the seller, the expense will not be included in the ledger in one amount. In this case, the cost of obtaining income constitutes only depreciation write-offs.

The expenses incurred are not always tax deductible

As you can see, the expenses incurred are not always the same as tax costs. In order to be able to record them in the tax revenue and expense ledger, and then reduce the generated revenues by their value, the entrepreneur must meet several basic conditions. Only when each of them is met, the expense can actually become the company's expense.