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Tax deductible costs - what can we include in them?

As part of the conducted business activity, an entrepreneur is also forced to incur various types of expenses in order to obtain income. The regulations do not mention outlays that may constitute tax deductible costs. On the other hand, there were specified expenses that categorically cannot be company costs. An entrepreneur who fails to classify them correctly could face serious consequences. When running a business, it is worth knowing what and when may constitute tax deductible costs.

Tax deductible costs - definition

Pursuant to Art. 22 sec. 1 of the Personal Income Tax Act, tax deductible costs are costs incurred in order to generate income, preserve or secure the source of these revenues. Obligatory to tax deductible costs cannot be included the expenses mentioned in art. 23 of the Act.Tax deductible costs are not, inter alia, costs of representation, including, in particular, expenses for catering services, purchases of food and beverages or contributions to organizations to which the taxpayer's membership is not obligatory (with some exceptions). In case of doubts whether the incurred expenses constitute tax deductible costs, the entrepreneur may apply for an individual interpretation, which will protect him during the tax inspection.

How should tax deductible costs be documented?

The regulation on keeping the book of revenues and expenditures defines how to properly document tax deductible costs. Documents constituting the basis for recognizing expenses in company costs should be prepared in Polish, legibly, carefully and permanently. If the proof was issued in a foreign currency, the entrepreneur is obliged to convert it into PLN in accordance with the requirements of the act on personal income tax.

Pursuant to § 11 point 3 and § 12 of the regulation, company costs may be confirmed on the basis of such accounting documents as:

invoices, VAT RR invoices, bills and customs documents,
other evidence, listed in par. 13 and 14 of the Regulation stating the fact that an economic operation was carried out in accordance with its actual course, marked with a number or otherwise linking the proof with accounting entries made on its basis, and containing at least:

reliable identification of the issuer or indication of the parties (name and addresses) participating in the business operation to which the proof relates,
the date of issue of the proof and the date or period of the economic operation to which the proof relates, provided that if the date of the economic transaction corresponds to the date of issue of the proof, it is sufficient to indicate one date,
the object of the economic operation and its value as well as its quantification, if the object of the operation is measurable in natural units,
signatures of persons authorized to properly document business operations,
marked with a number or in another way that allows linking the proof with accounting entries made on its basis.

documents related to the so-called cost adjustment.

In strictly defined situations, tax deductible costs may also be documented with internal evidence, which should:

have the date and signatures of the persons who made the expense,
specify the name, quantity, unit price and value of the goods or
if they do not relate to the goods - the subject of the business operation and the amount of the cost.

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Tax-deductible costs in practice

In practice, tax costs include all expenses that the entrepreneur incurs in order to obtain income or to secure or preserve its source, and which have not been listed in art. 23 of the Act. However, it should be remembered that the obligation to prove the relationship between the cost incurred and the revenues earned lies with the taxpayer. Of course, these must always be expenses directly related to the business.

The basic tax deductible costs include the purchase of commercial goods and basic materials. Standard company costs can also include expenses such as:

purchase of a company seal,
computer or laptop,
software necessary to run a business, e.g. for online accounting,
telephone and telephone subscription,
Internet domain,
maintenance and equipment of the premises (rent, utilities, telecommunications),
accounting services,
bank charges (in the case of a company account),
depreciation write-offs on fixed assets.
employee salary costs,
printer, scanner and other electronic accessories,
books and trade magazines,
logotype and business cards,
advertising cost,
the cost of business trips,