What expenses a self-employed person can count as a business expense - examples

The compilation provides examples and interpretations of controversial, questionable types of expenses that may or may not be deductible.

The summary we have prepared will allow you to assess which of the expenses incurred by the entrepreneur are ambiguous, as well as what conditions a purchase must meet in order to be recognized as a deductible expense. 

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Lawyer's purchase of a watch with chronograph function

The applicant conducts legal activities as part of an individual law firm. This activity mostly consists of drafting pleadings and various legal opinions, in addition to representing clients before courts and administrative bodies.

The basis for billing to clients is a daily statement of hours, kept to the nearest 5 minutes, the so-called "timesheet", indicating each successive task performed, along with the time of its execution, in the form of a Microsoft Excel document. Based on the timesheet, hourly billing to clients is prepared, which, upon approval, is the basis for invoicing clients for services. Due to the above-mentioned reason, an important tool for the Applicant's work is a device with a stopwatch/chronograph function, with the help of which it is possible to accurately measure the time spent on individual tasks, with the possibility of immediately stopping the measurement in a situation where, for example, a phone call from the court or office interrupts the execution of the current task.

The applicant must measure time with a "hand-held" device, which he must carry with him, and which allows him to instantly measure, pause, continue and summarize the time of a specific task. An ordinary watch will not be a sufficient tool for this.

The applicant intends to purchase a mechanical ("wind-up") watch of Russian manufacture, priced at PLN 2,490 (one of the cheaper options on the market), and intends to use it only on the days when he conducts business, since only then does he need to have the device with him constantly to measure the exact time devoted to particular tasks.

The expense incurred by the Applicant in connection with the purchase of a watch with a chronograph function, meeting the criteria outlined above, will be eligible for inclusion in deductible expenses - under Article 22(1) of the Personal Income Tax Act. It should be borne in mind that it is the Applicant, as the entity benefiting from the fact of including the expenses indicated in the application as tax deductible costs, who is obliged to demonstrate the causal connection of the incurred expense with his non-agricultural business activity, as well as the obligation to properly document it.

(Individual interpretation: Letter from the Director of National Tax Information dated June 8, 2021, 0113-KDIPT2-1.4011.408.2021.1.DJD).

Purchase of eyeglasses/lenses for medical office work

The Applicant obtained a license to practice as a dentist and started her own business in the form of an individual medical and dental practice. Due to the specific nature of the services performed, for eye protection and hygienic requirements, the Applicant is forced to use special glasses that protect the eyes from the entry of biological material (saliva and blood of the patient, as well as the remains of the treated - bored teeth), filings of materials, chemical materials used in the dental practice (bonding systems, rinses, or medicines applied to the mucous membrane). At the same time, such glasses are adapted for attaching protective face masks and magnifying devices (dental magnifiers). Due to a visual defect of -1.75 diopters, the Applicant must have special corrective lenses individually made at an optician for dental work, their absence would prevent her from practicing her profession as a doctor - dentist. In view of the above, the Applicant believes that it would be reasonable to include the expenses incurred for the eye examination and the purchase of corrective glasses as deductible business expenses. At the same time, the Applicant states that the purchased glasses and lenses will be used exclusively for her work in the dental office. Like an apron or medical shoes, they are constantly exposed to biological material during a dentist's work and should not be used outside the doctor's office.

A similar situation was considered favorably by the Head of the Tax Office, which was confirmed in another interpretation, issued to a taxpayer who runs a dental practice. However, with regard to the individual interpretation cited by the Applicant, in which a different decision was made, it should be emphasized that different decisions of tax authorities made even in analogous issues cannot be the basis for requiring an analogous decision in the Applicant's case, if this is prevented by the content of the law.

The expense for an eye exam and the purchase of corrective glasses and lenses is primarily intended to protect her health. Expenses determined by the health of a business person belong to expenses of a personal nature. In the situation of the occurrence of an eye defect, or its aggravation, an individual is forced to purchase corrective glasses or lenses, regardless of whether he is engaged in business or not. Thus, the immediate purpose behind incurring such expenses is to protect one's eyesight, not to generate income from non-business activities. Despite the indication that the Applicant will use the purchased corrective glasses and lenses exclusively for work in the dental office, the above purchase is conditioned by the Applicant's health condition, i.e. an eye defect that requires correction, and is therefore an expense of a personal nature, independent of business activity.

In the opinion of the Authority herein, incurring expenses for an eye examination and the purchase of corrective glasses and lenses does not affect the amount of income received from the provision of services performed in the course of business, nor is it related to the business as a source of income.

(Individual interpretation: Letter of the Director of National Tax Information dated November 7, 2019, No. 0113-KDIPT2-1.4011.423.2019.1.ISL).

Lunch with the customer

A tax cost can be a cost that is in connection with the business activity, was incurred as a result of the business activity. The exceptions are the expenses listed in Article 23 of the Law, which cannot be tax costs and reduce the taxable base. Expenses incurred for a meeting with a business partner at a restaurant, lunch or other refreshments, are not explicit, and there is a risk that such expenses will be considered representation.

These, by virtue of Article 23 of the Personal Income Tax Law, are excluded from the catalog of expenses that can be deductible.

The businessmen's doubts lie in the fact that neither the PIT Act nor other legal acts clearly explain what such representation is. According to the judgment of the Supreme Administrative Court of June 17, 2013. (ref. II FSK 702/11), in order to determine whether an expense is representation, it is necessary to determine the purpose for which it was incurred.

Unfortunately, the concept of representation is not explicitly defined and, despite the court ruling, can be interpreted differently. If a business meal is related to a meeting with a contractor or subcontractor, it may be considered by the tax authorities as an activity aimed at creating a positive corporate image or creating one to facilitate the conclusion of a contract, i.e. an expense of a representational nature, which cannot be a business expense. If the main purpose of such a meeting was to build the company's image or to make a good impression on the contractor/subcontractor, then the meeting at the restaurant cannot be booked as a business expense. However, it will be different if the purpose of the meeting is truly professional and concerns, for example, discussing the details of cooperation. Then the expense may be tax deductible.

Catering at a workshop with a trainer

Tax authorities do not see any obstacles to counting expenses related to the organization of trainings or workshops as costs, as they are related to the generation of revenue.

The applicant incurs expenses related to the organization of training courses, seminars, conferences, advertising events for contractors (information-promotional or promotional-advertising activities), which consist of expenses incurred for, among other things, customary refreshments and the purchase of non-alcoholic beverages or the purchase of a catering service or the purchase of a comprehensive service for the organization of a conference (invoiced by the organizer), which also includes a catering service.

The tax authority's interpretation says that in light of the law, it should be stated that the expenses that the Applicant will incur may be recognized as a tax deductible cost of business activity, as long as these expenses do not bear the characteristics of grandeur, lavishness, and their nature is not evidence of creating a positive image of the company, i.e. shaping a better perception of the company externally in comparison with business entities providing or offering similar services or products. It should be noted that activities whose main purpose is to improve the image of the entrepreneur also constitute expenses included in the costs of representation, which cannot be deductible costs of business activity.

(Individual interpretation: Letter of the Director of the Tax Chamber in Katowice dated July 26, 2011, ref. IBPBI/1/415-454/11/ESZ)

Unusual means of transport: bicycle, scooter, rollerblades

Although bicycles, roller blades or electric scooters are not very businesslike means of transportation, but quite a few people use them. They can be included in tax expenses, under certain conditions. The basic one is the actual use of the equipment for business, and you need to prove the extent of the equipment's use, such as the intention to get to a customer or business faster, especially during city rush hours.

Unusual means of transportation do not preclude ownership of a company car, as they can provide an alternative to its use in spring, summer and even autumn. They can also be a form of security in the event of a car breakdown. Non-typical means of transportation also reduce other costs such as car operation, fuel or parking costs.

An insurance agent applied for an individual interpretation in connection with the purchase of an electric scooter worth PLN 2,000. Although he owns a company car, he justified his request by saying that he often meets clients in the city center, where it is not only difficult to commute or find a place to park, but also incurs higher costs due to higher fuel consumption or parking costs. With a scooter, he could serve his customers more efficiently and thus faster. According to the answer he received - he can include the expense of purchasing a scooter as a tax deductible expense, provided it is used only for business activities. The deduction can be made only once, in the month of purchase of the scooter. 

(Individual interpretation: Letter from the Director of National Tax Information dated August 7, 2019, ref. 0112-KDIL3-3.4011.242.2019.2.TW).

Cleaning products and laundry

The purchase of cleaning supplies can be considered a tax deductible expense when conducting business away from home. When an entrepreneur carries out his business at home or in an apartment, in a separate part of it with a shared toilet, the tax law does not exclude expenses incurred for cleaning from tax deductible expenses. However, these expenses cannot be included in tax expenses due to their private nature. The toilet is a common place in business, as well as in private use, where private use is predominant, expenses for cleaning products related to toilet maintenance should not be included in expenses.

(Decision on interpretation of tax law of the Second Tax Office in Gdynia ref. PD2/4111/415-0036A/06).

Protective clothing or clothing with a company logo, which is distinguishable from privately used clothing, is an item of company property and the expense of washing it can be a company expense.

(Individual interpretation: Letter of the Director of National Tax Information dated September 18, 2017, ref. 0114-KDIP3-1.4011.235.2017.2.IF)