Polish tax authorities have recently issued two private tax rulings: one dated 25 June 2024, ref. 0111-KDIB2-1.4010.202.2024.1.ED (“June Ruling”), and the other dated 20 May 2024, ref. 0111-KDIB2-1.4010.138.2024.MM (“May Ruling”), concerning the tax treatment of the costs of organising various events for employees, contracted workers and guests on the occasion of the firm’s anniversary.
According to the facts of both cases, the events were to be attended by both employees (with family members) and invited guests (e.g. contracted workers, suppliers, customers, local authorities). To organise the events, the applicants incurred various expenses, such as room rental, catering, concert. The applicants wanted to know if their expenses would qualify as tax-deductible.
In the June Ruling the authority confirmed that the organisation expenses could be deductible for tax purposes to the extent they related to employees (and their families), provided that the expenses for that group of attendees are separated and a cost-per-person for the event is calculated. In contrast, the authority held that the expenses related to invited guests (the other group) are entertainment/hospitality expenses and as such are not tax-deductible. In the May Ruling the applicant made its case in accordance with the authority’s current views that the anniversary event expenses related to employees meet the definition of tax-deductible costs while those relating to contracted workers, customers, suppliers and other guests (e.g. local authorities) are not deductible because they qualify as entertainment/hospitality. For that reason, the ruling authority fully agreed with the applicant and waived giving legal reasons for its ruling.
Both rulings are part of a taxpayer-unfriendly line of authority which currently restricts the tax deductibility of staff event / special event expenses to the extent they relate to contracted workers, business partners or guests (e.g. persons who are not taxpayer’s employees). With this in mind, any such expenses should be reviewed in terms of being properly accounted for for the purposes of corporate income tax.
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