You run a business and pay high taxes? This article is for you.
Why is my tax so high? Only tax, tax, tax. What can I do to reduce my taxes? – we usually hear from clients of the accounting office. It is a problem for many foreigners, who have a company in Poland. Not everyone knows that it’s the costs that let us pay less tax. Let’s start from the beginning and generating costs will be easy for you.
1. What are costs in a company?
Cost is used to generate revenue in a company or to secure sources of income (the cost of protective masks during the coronavirus) in a company. Costs should be related to the type of business. The entrepreneur should be able to explain why this cost belongs to the company’s expense. In case of control, the Tax Office may not accept cost invoices and give you a small financial penalty.
2. Main rule.
When you bought new software, later you thought “Oh, no I could take the invoice” No! You can’t forget to confirm your purchase. The Ministry of Finance has introduced an obligation to provide your tax ID number (NIP) before making a purchase in 2020. This means that after paying for products, you don’t receive an invoice if you don’t provide a NIP before.
The main rule is that invoices are a basic thing to include something in the cost in the company. These documents have to include your full name, address, and NIP of the company. Mostly the purchase confirmation is an invoice, but it may also be a bill or proof of payment e.g. a receipt for a highway ride.
3. So, what are these costs?
As I mentioned above typical costs are closely related to the company, e.g. building materials for the builder. However, there are costs that all entrepreneurs bear. Below you can find a little handout about which costs can zoom out your tax:
| Cost area | Example |
| office, office equipment | rent, utilities, Internet subscription, office accessories |
| electronics and accessories | computer, laptop, tablet, smartphone, printer, scanner, electronic accessories, mobile phone subscription |
| education | books, courses – just the one connected with the functioning of your company |
| promotion and advertising | business cards, website, advertising on the Internet / social media, domain, |
| vehicle means (car, motorbike, bicycle) | depreciation/leasing, fuel, parts for a given vehicle means, insurance |
| business travel | diets, accommodation (hotel service), transport, tickets (airline, PKP, etc.) |
| travel to the office, client | taxi, public transports |
| others | accounting service, company insurance |
If you incur such costs, it’s about time to make them tax-deductible.
4. Exceptions!
There are exceptions, and these are the most common mistakes, what you CANNOT qualify as company’s costs:
- Company representation costs (e.g. alcohol, gifts for clients).
- Groceries (unless bought for meeting with clients e.g. coffee, sugar).
- Clothes which aren’t specialized for a specific profession and not bought in a specialized shop.
- Prescription glasses for your own use.
That’s everything. Now, analyze the type of your business and check costs. Maybe you generate universal costs and don’t know about them. Remember, that high costs are small taxes. If you need tax help, write to us! We will help you.
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