By Dr Robert Lewandowski, attorney at law (radca prawny) at Derra, Meyer & Partners in Warsaw
Previously the Polish tax authorities has allowed tax payers to include the cost of alcoholic beverages on expense accounts as deductible but you might be both shaken and stirred to learn that recently this situation has been changed. A Polish company intended to reclaim business related expenses incurred during meetings with its partners. During these meetings, beer and wine were usually served to complement the food and the company argued that this was seen as good business manners. Unfortunately, the tax authorities were of a different opinion in this case and have ordered the company to remove the cost of alcoholic beverages from cost settlements presenting a view that wine and beer are not related to the company’s income. As a consequence, the tax office regarded these expenses as so – called costs of representation which are usually aimed to improve the company’s standing only and which cannot be used to reduce the corporate tax burden. This decision of the tax office is controversial and has often been criticized. Meetings with business clients and customers constitute a part of business activities and a glass of wine or beer shared with a client warms mutual relations, improves the conversation and is often used to break the ice in business negotiations. According the interpretation by tax office, business people in Poland shall not be allowed to treat their clients to alcoholic aperitifs and then later reclaim these costs as expenses. It may only be expected and hoped that this decision of the Polish Tax Office will be objected to by tax payers soon and overruled by administrative courts. This case shows further that the issue of expenses related to the use of alcohol is an example of a non - uniform interpretation of Polish tax provisions by tax authorities and this interpretation should be - in the event of any doubts and ambiguity - in favor of tax payers with regard to current legal status.
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