Running a business is closely related to the settlement of various economic events that take place within the framework of the company being run. Some of these events generate profits, while others generate costs. While a company has to incur a variety of expenses, not all of them are actually tax deductible costs. The relevant regulations regulate which of these costs can be deducted from the tax base. Before starting settlements, it is worth reading them to know what can be included in the costs and what will not be.
As a rule, tax deductible costs include all expenses which, if incurred, directly or indirectly, will contribute to obtaining income or will allow you to secure the source of income. Consequently, when showing any expenses in tax deductible costs, the entrepreneur must take into account that he will have to justify their incurrence. It is up to him to prove the relationship between expenses and profits. If such a relationship is not proven or is at least doubtful, then, during a possible fiscal audit, it may face very serious consequences, including financial ones.
Unjustified introduction of expenses to tax deductible costs reduces the tax base and the input tax. Therefore, if the entrepreneur pays the tax too low, it means that the tax settlements are incorrect, and this is already burdened with various consequences.
The issue of documenting expenses is also important. Apart from the fact that they must be related to the profits generated by the company, they must be clearly documented. Documents confirming the expense include bills, invoices, VAT RR invoices, customs bills. Receipts or other types of documents cannot be the basis for entering expenses into accounting.
In some situations, the entrepreneur may use the so-called internal documents, i.e. documents created independently for his own needs, to document the incurred expenditure. However, to have their book value, they must be prepared in accordance with the guidelines contained in the regulations. This means that they must accurately describe the economic event – the purchase of a good or service, must be marked with a date, a unit amount for the purchase, the scope of the purchase and its total value. The document must also contain the signatures of people who took part in the given economic event.
Tax deductible costs, as already mentioned, must be related to the profits generated or to the securing of the source of income. This means that expenses such as paying for the office, business trips, maintaining a company car, or making a stamp and retaining employees, of course, can be included in the company’s tax deductible costs. All these expenses actually contribute to generating profits, they affect the work and development of the company, so they can be clearly justified.
The problem may arise when accounting for purchases such as coffee or cookies for the office. Of course, they serve to receive contractors in an appropriate manner and be able to offer them refreshments. However, such expenses are not clear cut and it is worth considering them carefully before entering them into the accounting.
It is definitely a good practice to hire an experienced accountant who not only knows the current regulations, but more importantly, is able to interpret them correctly and apply them to a specific situation. Thanks to it, bookkeeping will be much simpler and more effective, and doubtful expenses can be omitted in the accounting, which will prevent the entrepreneur from being exposed to inspections and the need to submit explanations.