Business dinners can sometimes be a cost

One of the solutions used by entrepreneurs to conclude contracts is organizing business lunches and dinners. Doubts arise, however, when the costs related to them are settled, because they were very often recognized as representation costs in court judgments and tax interpretations. However, the Supreme Administrative Court (II FSK 702/11) is of a different opinion, stating that business meals are not associated with improving the image of the taxpayer, but with the company's revenue. For this reason, they may be considered tax costs.

In justifying its judgment, the Supreme Administrative Court emphasized that in each case it should be individually examined whether the given expenses constitute a tax expense or a cost of representation. Therefore, it cannot issue a resolution that unequivocally defines the concept of representation costs, which would be common to all cases.

In the facts presented by the court, the taxpayer - the applicant appealed against the Tax Chamber in Katowice to the Gliwice Voivodship Administrative Court for the interpretation issued on the expenses incurred for business meetings with contractors in restaurants and catering organized for them at the company's premises. In the opinion of the Chamber, the purchase of meals and drinks constitutes the cost of representation, which cannot by law be considered a tax cost. The entrepreneur explained that if a business dinner were to represent representation, then it would be associated with grandeur and sumptuousness. However, in his opinion, business meetings were not aimed at creating an image, but at leading to the signing of a contract.

The Gliwice Voivodship Administrative Court dismissed the taxpayer's complaint, ruling that representation cannot be considered as defined in the Polish language dictionary. According to him, the legal definition of this concept is all activities related to creating the image of an entrepreneur, maintaining good relations with contractors, which are not necessary to achieve income, but help in this.

As a result, the applicant appealed against this verdict to the Supreme Administrative Court which, considering the case, stated that it would not issue an appropriate resolution. He decided to issue a verdict with an enlarged bench of seven judges, in which he held that catering services provided to contractors are not always at the expense of representation. It is different when they contribute to creating the image of the entrepreneur and are not strictly related to his income.

The above judgment, although not binding on all judges of the Supreme Administrative Court and administrative courts, may be a determinant in resolving similar problems in the future.

The previous judgments issued by the Supreme Administrative Court show that some judges considered correct positions of entrepreneurs claiming that the expenses incurred for organizing business lunches were binding in trade negotiations. As a result, they aimed at signing a contract with a given contractor. However, you can also meet with the opinion that they testify to the creation and consolidation of a positive image of the company, therefore, according to the interpretation of the law, they should be considered representation, which consequently does not constitute a tax cost.