Gift cards as a tax expense - when do you include them as a tax deductible expense?

Deductible costs is one of the key issues for every entrepreneur. Properly classifying expenses as tax deductible costs allows you to manage your company's finances more efficiently, as well as to reduce the taxes due in compliance with the regulations. In the following article, we explain how to correctly understand deductible expenses in the context of gift cards and vouchers for business partners and why you should consider applying for individual interpretation of tax legislation.

What are deductible costs in the context of contractor benefits?

In accordance with Personal Income Tax (PIT) Act, tax-deductible expenses are those incurred in order to achieve, preserve or secure a source of revenue, insofar as they are not excluded in Article 23 of that Act. In practice, this means that if an expense:

1. has real cause-and-effect relationship with the creation or increase of revenue,
2. is economically justified for the business,
3. was duly documented for tax purposes,
4. does not appear in catalogue of excluded expenditure from tax expenses, it can be recognised as a tax expense and reduce the tax base.

Gift cards for contractors - tax expense or representation?

One popular way of building business relationships with contractors is through gift cards or other forms of benefits (e.g. vouchers, event tickets or gifts in kind). Their purpose is usually to encourage cooperation, increase customer loyalty or thank for existing business relationships.

However, it is worth remembering that the PIT Act does not give a clear answer as to whether such an expense automatically becomes a deductible cost. In your tax return, you need to take into account:

• marketing objective - if the main intention is to support sales, increase revenue or attract new customers, the expenditure may be treated as tax cost.
• representative character - if the main purpose is to create the company's prestige (e.g. the expense of a lavish party solely for image purposes), it may be deemed to be a cost of representation, which is excluded from tax deductible costs (Article 23(1)(23) of the PIT Act).

The key question when accounting for gift cards is: is the predominant purpose of the expense image-building and prestige or a specific, direct impact on revenue generation?

How to distinguish between representation costs and marketing costs?

The PIT Act does not define the term "representation". In tax practice, it is assumed to mean activities that seek to create a favourable image for the company, without directly affecting sales or contracts. For example: - the costs of catering, the purchase of food and beverages (including alcoholic beverages) for purely image purposes are representation, - gifts of a promotional nature, branded company gadgets given to potential customers to support sales - may be included in the the company's marketing costs.

The tax qualification depends on the intention and purpose of the expense. If gift card for a business partner has a clearly identifiable link to future revenue (e.g. a form of motivation for further cooperation, which may translate into specific orders), then the chances of such an expense being considered a deductible growing.

KIS individual interpretation - why should it be requested?

The tax rules on gift cards can sometimes be ambiguous, so in doubtful situations, the best solution may be to request a individual interpretation To National Fiscal Information Service (KIS). This is the official position of the tax authority, which:

1. relates specifically to your business situation - you describe a factual situation or future economic event in detail,
2. gives certainty of a tax ruling - if you comply with the interpretation, you should not suffer negative tax consequences in the future,
3. protects you in the event of a dispute with the tax authorities - in the event of an inspection, you can refer to the interpretation obtained.

For many businesses, this is an effective way to optimise tax and avoid the risk of costs being questioned. In particular, when expenditure on gift cards or gifts for contractors may raise doubts with the office as to their nature (marketing vs. representation).

How to apply for an individual interpretation to the NIS?

When applying for an interpretation (form ORD-IN), you can do this in several ways:

1. electronically via e-PUAP - using the Electronic Submission Service (ESP)/KIS/applications,
2. via e-Fiscal Office portal - attach the request as an annex to the general letter,
3. in person - at the registered office of the National Fiscal Information in Bielsko-Biała (ul. Warszawska 5, 43-300 Bielsko-Biała),
4. by letter - by sending a request to the address of the National Fiscal Information.

Necessary documents and fees

• completed ORD-IN application (available at podatki.gov.pl),
• proof of payment fees of PLN 40,
• possible attachments - supporting documents, e.g. contracts, invoices,
• Signature - the application must be signed (in manuscript or by electronic signature).

How long does it take? KIS has 3 months to issue a tax interpretation from the date of receipt of a complete application.

Summary: When are gift cards tax deductible?

Gift cards for contractors whether other business benefits can be included in the deductible costsprovided that they do not bear the hallmarks of representation and that their main purpose is directly linked to the generation or increase of income in the company.

The boundary between marketing costs a representation expenses can be fluid - the key is the business purpose and how the expense is documented for tax purposes.

If you have any doubts about the settlement of gift cards, you may want to consider applying for a individual interpretation - is the best way to be sure of the correct tax settlement in the entrepreneur's specific situation.

Being cautious in qualifying expenses avoids potential disputes with the tax authorities and ensures that you fiscal security. If you are considering this type of marketing with gift cards, try to collect the relevant evidence (e.g. commercial offers, documentation proving the revenue relationship), obtain an individual interpretation from the KIS.

Want to make sure your expenses qualify as tax deductible? Get in touch with us:

📞 +48 606 608 089
📧 sekretariat@bktkancelaria.pl