Language course as a company cost
In order to include a given expense as a tax deductible cost, it must meet the basic condition - be related to the conducted business activity.
Nowadays, more and more entrepreneurs make transactions with foreign contractors. However, in such situations, success cannot be guaranteed only by an attractive offer. Knowledge of foreign languages can also be helpful. Can an expense on a language course for a business owner or employee be considered a corporate expense?
Language course - employee
Tax deductible costs are costs incurred in order to generate income or to maintain or secure a source of income. Therefore, if the owner of the company wants to pay the employee a language course, he must take into account whether there is a relationship between this course and the scope of the employee's job duties and the type and nature of the business. If such a connection exists, the entrepreneur may include the expenses for the language course for the employee as corporate expenses.
The provision of art. 17 of the Labor Code indicates that the employer is obliged to facilitate the improvement of professional qualifications by employees. Art. 1031 § 1 states that improving professional qualifications is understood as gaining or supplementing knowledge and skills by an employee, on the initiative of the employer or with his consent.
The above provision does not mean, however, that an entrepreneur who pays a language course for his employee who is a crane operator may also include this expense as tax deductible costs. In this case, the costs incurred on the course will not contribute to the income earned by the business owner. Because it has nothing to do with the definition of tax deductible costs.
Language course - contractor
The expenses incurred on the language course for the contractor may be considered a business cost on the terms resulting from the definition of the tax cost.
This is possible when the parties conclude in the contract a provision on the financing of the language course for the contractor by the client, because the knowledge of a given foreign language is necessary for him to perform the order.
Language course - business owner
As for the entrepreneur himself, the expenses for the language course for him will not always be included in the company costs. Tax authorities consistently comply with whether the expenses incurred by the entrepreneur could be included in the company's costs. Therefore, the owner of the company should be able to indicate the purposefulness of the incurred expense.
In order to correctly determine whether a given expense can be classified as tax deductible costs, an entrepreneur should consider two important issues:
Can the incurred expenditure be considered related to improving professional qualifications, acquiring knowledge and skills necessary and necessary in running a business?
If an entrepreneur, through a language course, will acquire skills that will contribute
increase the revenues of his company, then the expenses incurred on this course may be included in the company's costs.
Is the expenditure incurred only personal, due to the fact that it serves only to raise the general level of knowledge and education not related to business activity?
In this case, the expenses incurred on the language course cannot be recognized as tax deductible expenses. This has nothing to do with the definition of the Personal Income Tax Act.
A taxpayer who wants to include expenses incurred on a language course (for himself or for an employee) as corporate costs must be able to indicate a connection with the conducted activity. This expenditure should be rational and contribute to the achievement of revenues or the preservation or protection of their source. The entrepreneur should also remember to properly document these expenses.