Financing of studies by the employer as an employee's tax-exempt income

One of the basic obligations of the employer is to help employees improve their professional qualifications.Employers often come up with proposals for financing employees to improve their professional qualifications, inter alia, by financing the costs of post-graduate studies, courses, seminars. An educated employee is, in a way, a positive element for the employer, and therefore the cost of covering various types of training will be reimbursed for the most part. However, can the financing of studies by the employer be considered as the employee's income, and if so, in this case, has the legislator given the possibility to take advantage of the tax exemption?

The legal basis for improving professional qualifications under the employment relationship

Pursuant to Art. 103 § 1 of the Labor Code, improving professional qualifications is understood as gaining or supplementing the knowledge and skills of an employee, on the initiative of the employer or with his consent.

The above-mentioned regulation is in line with other provisions of the Labor Code, according to which the professional qualifications of employees required to perform work of a specific type or on a specific position are determined in internal regulations (e.g. in a collective labor agreement) or in specific regulations. Therefore, they indicate what qualifications an employer may expect from employees when performing work of a certain type or in a specific position. The provisions of the Labor Code relate primarily to the improvement of professional qualifications as part of the work currently performed by the employee, but they may also apply in the event that the employee is to be promoted or the employer intends to offer him other working conditions, e.g. work in a different position, due to to change the company's business profile.

The employer, when making this specific investment in an employee, can expect that he will use his skills, or at least will have the opportunity to do so. Only the active performance of duties by the employee ensures that this goal is achieved. Thus, colloquially speaking, there is a "return" of the funds invested in the employee voluntarily by the employer.

As indicated in the introduction, pursuant to Art. 17 of the Labor Code, the employer is obliged to help employees improve their professional qualifications.

According to the judgment of the Supreme Court of March 1, 2018, III UK 33/17: “It is up to the employer to“ facilitate ”raising qualifications, which should be understood as not refusing to consent to the form of education chosen by the employee without justifiable reasons and creating a positive atmosphere for the learning employees. The employer may consent to the employee's education (also during work), but there are no regulations for the employer to bear the costs of the employee's education in such a situation. The employer, in the discussed scope, should, however, bear in mind that the omission of an employee in selecting to participate in training to improve professional qualifications may be considered a breach of the principle of equal treatment in employment (Article 183b § 1 point 3 of the Labor Code). "

Methods of financing by the employer to raise the employee's professional qualifications

The employer may grant additional benefits to an employee raising his professional qualifications, in particular, covering fees for education, travel, textbooks and accommodation.

According to Art. 103 of the Labor Code, the employer concludes an agreement with an employee raising his professional qualifications, specifying the mutual rights and obligations of the parties. It is included in writing. The said agreement may not contain provisions less favorable to the employee than the provisions of this chapter.

From the provision of art. 103 § 1 of the Labor Code, the employer concludes a written contract with the employee to raise professional qualifications. Since the written form has not been made invalid by the act, it should be considered as a written form for evidence purposes - Art. 73 § 1 of the Civil Code in connection with joke. 74 § 1 of the Civil Code. The provision of art. 74 § 1 of the Civil Code provides that the reservation of a written form without the pain of nullity has the effect that, in the event of failure to observe the restricted written form, evidence from the testimony of witnesses or the parties to the fact of performing an action is not admissible in the dispute.

Financing the studies by the employer as the employee's income

Assistance in obtaining an answer to the question whether the financing of studies by the employer can be considered as the employee's income will be guaranteed by the provisions of the applicable law. Pursuant to Art. 10 sec. 1 points 1 and 9 of this Act, the sources of revenue are, respectively:

1. business relationship, employment relationship, including a cooperative employment relationship, membership in an agricultural production cooperative or other cooperative engaged in agricultural production, outwork, retirement or disability pension;

2. other sources.

Pursuant to Art. 12 sec. 1 of the PIT Act, all types of cash payments and the monetary value of benefits in kind or their equivalents, regardless of the source of financing these payments and benefits, and in particular: basic remuneration , remuneration for overtime, various types of allowances, awards, equivalents for unused leave and all other amounts, regardless of whether their amount has been determined in advance, and in addition, cash benefits incurred for the employee, as well as the value of other unpaid benefits or partially paid benefits . Consequently, can the financing of studies by the employer be considered as the employee's income?

It should be noted that when used in Art. 12 sec. 1 of the PIT Act, the phrase "in particular" means that the mentioned categories of revenues constitute an open catalog. Therefore, the income from the employment relationship and related relationships are all kinds of payments and benefits resulting in the creation of a financial gain for the taxpayer, originating from the employment relationship or a related relationship between the employee and the employer. Moreover, the wording of this provision indicates that the employee's income includes virtually all benefits received by him that he could have received from the employer. They are not only remuneration, i.e. benefits directly resulting from the concluded employment contract, but also all other income (benefits), regardless of the basis for their payment, if in any way related to the fact of performing work. This means that the legislator included in the employee's income not only money, but also the value of benefits in kind or gratuitous benefits received from the employer. The above interpretation leads to thinking that the financing of studies by the employer can be considered as the employee's income. But what does the court say?

As indicated by the Supreme Administrative Court in Warsaw in the judgment of July 11, 2018, II FSK 1965/16: “Income from employment, pursuant to Art. 12 sec. 1 u.p.d.o.f., there is any payment and benefit resulting in a property gain on the part of the employee and having its source in an employment or related relationship between the taxpayer and the employer ”.

In order for income other than wages to be considered as income from an employment relationship, there must be a bond between the employer and employee - the basic ratio.

Financing of studies by the employer as an employee's tax-exempt income

Pursuant to Art. 21 sec. 1 point 90 of the PIT Act, the value of benefits granted in accordance with separate regulations by the employer for the improvement of professional qualifications is free from income tax, with the exception of remuneration received for the time of dismissal from all or part of the work day and for training leave.

The wording "separate provisions" used in the above-cited provision includes, inter alia, the Act of June 26, 1974, the Labor Code.

According to the judgment of the Provincial Administrative Court in Wrocław of March 14, 2008, I SA / Wr 1505/07: “The provision of art. 21 (1) (90) of the Personal Income Tax Act should be interpreted in such a way that the exemption from personal income tax applies to the value of benefits granted by an employer to an employee related to the improvement of professional qualifications and general education of an employee in non-school forms on the basis of a referral from an establishment work. The concept of out-of-school forms should be understood as any form of employee education not covered by school forms, such as, for example, courses, trainings, seminars or postgraduate studies ”. Accordingly, the funding of the studies by the employer may be considered as an employee's income that qualifies for tax exemption.

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Example 1.

Jan Kowalski works at ABC Sp. z o.o. as a sales representative. In order to improve Mr. Jan's sales results, the employer referred him to postgraduate studies in sales techniques. He covered the costs related to the employee's postgraduate studies. Due to the fact that the financing of studies by the employer may be considered as the employee's income from the employment relationship, he will be subject to the exemption specified in Art. 21 sec. 1 point 90 of the PIT Act.

The situation is different in the case of financing the costs of raising professional qualifications by a third entity.

Example 2.

Jan Nowak works at DEF Sp. z o.o. as a sales representative. The employer belongs to the Employers' Union, whose task is to support employers. DEF Sp. z o.o. pays monthly membership fees. The Employers' Union met the needs of members of the organization (employers) and decided to organize postgraduate studies in sales techniques. Individual members selected employees who were offered these qualifications. The Employers' Union covered the costs of educating employees. Can in this case be consideredfinancing of studies by the employer as an employee's tax-exempt income? The answer is negative. Postgraduate studies were not financed by the employer, but by the organization to which he belongs - the Employers' Union. Once the membership fee is paid, it becomes an element of the union's property that can be used by it. Although the employer pays membership fees every month, which are used by the union for the implementation of its own statutory goals, this does not mean that it financed the cost of the employee's education.

In the above case, the coverage by the union - as a third party - of the employee's training costs does not benefit from the exemption under Art. 21 sec. 1 point 90 of the PIT Act.

When considering tax issues, it is always worth analyzing the actual state of affairs - incl. Can the financing of studies by the employer be considered as the employee's tax-exempt income? These considerations should be conducted from various angles and based on the currently applicable legal provisions and (sometimes very helpful) individual interpretations and judgments of administrative courts. This will allow you to avoid later problems related to tax proceedings conducted by tax authorities.