Catalogue of expenditures not being tax-deductible costs

Jars777 20 | 70

7 May 2013 / #1

Hello all.

I have a question to all self-employed people or accountants. :-)

I had a debate about tax deductible costs here and I searched for some clarification online.... this is the only thing I found so far:

Tax deductible costs

In order to be recognised as tax deductible cost, an expenditure incurred by a taxpayer should jointly meet the following criteria:

- the expenditure was incurred with purpose of generating income, retaining or protecting sources of income,
- it is not listed in the catalogue of expenditures not being tax-deductible costs.

The revenue earning costs can be classified as direct costs or other costs.

As a rule, direct costs are deductible in the tax year in which the related revenue was earned. Other costs are deductible on the date they were incurred.

Tax deductible costs incurred in foreign currencies, should be converted into PLN on the basis of the average exchange rates of the National Bank of Poland from the last working day preceding the day the costs were incurred.

This is obviously not very specific and I cannot find the actual catalogue of expenditures not being tax-deductible costs. Is this available anywhere? I don't mind if it is in Polish.

Google translate will help I am sure. :-)

The actual question is.... can someone who is i.e a self-employed English teacher (no employees) claim for teas, coffees, juices as a monthly cost? Or would this not be seen as purpose of generating income. I guess you could argue that a person has to drink and provide drinks for his students being taught at home?

Thanks for your replies.

J

Harry

7 May 2013 / #2

The actual question is.... can someone who is i.e a self-employed English teacher (no employees) claim for teas, coffees, juices as a monthly cost? Or would this not be seen as purpose of generating income. I guess you could argue that a person has to drink and provide drinks for his students being taught at home?

It would very much depend on the circumstances. I doubt that the tax office would take kindly to you claiming that you have to provide coffee to students when teaching them, providing coffee with lessons is very simply not common practice for schools. However, if you are giving lessons in a cafe, it's going to be tough for the tax office to claim that the expense of a coffee is not a business expense (if you don't buy that coffee, you can't give the lesson in that cafe; if you don't give the lesson, you don't earn the income).

Generally, tax offices can and do take into account given circumstances when assessing what is and is not tax deductible. For example, firms are only allowed to put a certain amount of restaurant bills through the books as expenses, they are classed as 'representation expenses'. One year I put through quite a bit more than the maximum, my tax return was accompanied by a note pointing out that I'd been generating income writing restaurant, cafe and bar reviews for a magazine and that it would have been impossible to generate the income without actually being a customer of the places in question. The tax office were fine about it.

OP Jars777 20 | 70

7 May 2013 / #3

providing coffee with lessons is very simply not common practice for schools.

I agree that is it not common practice for schools. But in our own home? Surely it would be rude not to offer a tea or coffee?!

But I get your point. It was my inclination that it sounded a little good to be true. My accountant says that is isn't possible to claim but a friend was adamant and she claims for stuff like this. Probably better safe than sorry.

delphiandomine 86 | 17823

7 May 2013 / #4

From what I understand - you can claim, but you'll have to buy wholesale amounts of the stuff and be able to prove that it's for work purposes only. That'll be impossible if you teach from home - unless you keep meticulous records as to when you serve it.

We provide water in my school and we claim it - but again, we have a real building and the taxman can see who is drinking it.

Harry

7 May 2013 / #5

I agree that is it not common practice for schools. But in our own home? Surely it would be rude not to offer a tea or coffee?!

It's business, not social.

My accountant says that is isn't possible to claim but a friend was adamant and she claims for stuff like this. Probably better safe than sorry.

Some small business owners here frankly take the p!ss. I know somebody who claims newspapers as business expenses. It is better to be safe than sorry, but if you really want to find out, you can always write to your local tax office and ask them for a binding ruling on the matter.

delphiandomine 86 | 17823

7 May 2013 / #6

It's business, not social.

From the eyes of the tax office, I imagine they would want to see a clear relation between hours worked and coffee/tea consumed.

Newspapers are actually allowed in some circumstances!

I wonder if they've wised up yet to the "big telly being used as a monitor" scam?

Harry

7 May 2013 / #7

I wonder if they've wised up yet to the "big telly being used as a monitor" scam?

Er, well, given that my business is registered for "translation, editing and other language work" and "other literary creation", I really do need a monitor which lets me have six to eight windows open at the same time so that I can look at all of them at the same time when working on a document and that's why my monitor needs to be so large.

delphiandomine 86 | 17823

7 May 2013 / #8

I did see a rather nice 75" telly in Germany that would fit your needs perfectly...

tighmahy

30 Aug 2014 / #9

And what if your house is your office as well? can I deduct my rent and utility costs from tax If i have a LLC company? Any idea?

krecik89 3 | 60

1 Sep 2014 / #10

You can as an individual rent out a part of the house to the company. You need a formal contract and a market rent. I'd get more advice on the proportion of rent and bills you can claim, definitely not all if you're also living there. Probably you can add the utility costs to the rental agreement.