A suit as an expense in the company

An entrepreneur may deduct expenses for clothes bearing the permanent marking of his company as tax deductible costs. The officials agree to this.

Sewing initials on a shirt and jacket provides tax benefits – these are the conclusions from the interpretation of the director of the National Tax Information. It will please everyone who invests in elegant business attire.

– For many years, the tax office has excluded suits that entrepreneurs bought from their costs. Recently, he has become more relaxed and tolerates spending on elegant clothes, as long as they are marked with branded elements in some way.

Outfit for a business meeting

Let’s look at the case of an entrepreneur who is a representative of a foreign company. For the needs of his business, he bought a suit and a shirt. He wants to settle the expenses as tax deductible costs. He argues that he must present himself well at business meetings. He assures that he will not use the clothes for private purposes. This is confirmed by the permanent marking of the shirt with a monogram (these are the entrepreneur’s initials, which are the symbol of his company), and the jacket with a coat of arms (also identifying the company).

Is this enough to settle tax costs? Yes. The tax office confirmed that the clothing with the company’s logo serves an advertising function. It increases the company’s recognition, which may result in an increase in revenues.

Expenditures on the purchase of a shirt and suit may therefore be tax deductible. Just like the payment for making the monogram and coat of arms. It is also allowed to settle an invoice for washing clothes in the company (interpretation no. 0114-KDIP3-1.4011.235.2017.2.IF).

Does this mean that entrepreneurs have found a way to expense clothes?

– Recent interpretations show that sewing on initials or other markings makes it possible to settle expenses in the company – says Radosław Żuk. – However, you have to remember about the conditions.

First, the designation must actually be associated with the company. Initials alone may not be enough to settle the cost if they are not part of the company’s name. For example, if the company’s name is “Jan Kowalski Przedsiębiorstwo Handlowo-Usługowe”, sewing the initials “JK” on the lapel of the jacket will not give the right to include the expenses for its purchase as costs.

Secondly, the marking must be permanent. It cannot be a badge that can be detached at any time.
Thirdly, the company logo should be visible to other people.

The tax office can check

Entrepreneurs should therefore be careful when settling such purchases. The tax authorities themselves stipulate in the described interpretation that “the validity of including the expenses indicated in the application as tax-deductible costs of business activity may be verified in the course of possible tax proceedings.” And he emphasizes that the entrepreneur is obliged to demonstrate the relationship between expenses and revenues.

The tax office’s interpretation shows that it is easier to settle outfits for companies that buy them for employees. They are usually the same, in characteristic colors, with a clear logo. This is the case in industries where employees have contact with customers, e.g. restaurants, stores, banks.

Summary

In many professions, a suit is normal work attire. It is necessary to run a business, just like a telephone or computer. It’s good that the tax office agrees to include it in costs, but I consider introducing the condition of permanent marking with a company logo as too stringent. Embroidering initials or a name just to gain tax benefits is an unnatural action. The tax office should agree to include costumes without a logo in the costs as well. Of course, some entrepreneurs could abuse this option and deduct private clothes. However, we must not make life difficult for everyone just because there is a group that bends the rules.