Membership fees and tax expenses

January 30, 2024

Many entrepreneurs belong to various types of organizations, associations, or trade unions. There are organizations that require mandatory membership, but also those that unite people who voluntarily want to join. In many cases, they pay membership fees, which raises the question: what about tax costs?

Types of membership in organizations

Membership in some organisations is mandatory. Examples include industry organisations of doctors, nurses, pharmacists, notaries and architects. The second group of organisations brings together entrepreneurs voluntarily. Membership in these types of associations facilitates business contacts and allows you to exchange experiences and participate in the work of various working groups.
Regardless of whether membership in a given organisation is obligatory or voluntary, it most often involves paying membership fees. When an entrepreneur incurs the cost of such contributions, they wonder whether they can include them in tax costs.

Membership fees: what do the regulations say?

Let us begin with a good message for entrepreneurs, who are members of an organisation or association in which membership is obligatory – costs of contributions paid to such associations can be included, with no restrictions, in tax costs. What about contributions to an organisation in which membership is voluntary?

According to Art. 16 section 1 point 37 of the CIT Act, contributions to organizations to which membership of an entrepreneur is not obligatory, as a rule, do not constitute tax costs.

There are two exceptions to this rule, concerning contributions paid to:

• organizations conducting business in the field of tourism, recreation, sports, and leisure on behalf of the Polish Tourist Organization;
  
• organizations that gather entrepreneurs and employers – operating based on separate individual laws have a limit on the amount of contributions in a tax year. This amount cannot exceed 0.25% of the salaries paid in the previous tax year, which constitute the basis for calculating social security contributions.

Rules for crediting contributions to costs

So if an entrepreneur would like to include the contribution paid to a given organisation as an expense, what steps should he take?

• verify on what basis the given organisation works– this activity must take place based on separate acts;
  
• to calculate the maximum limit to which you can attribute contributions in a given year. The limit is calculated as follows: the amount of salaries paid in the previous tax year, which forms the basis for calculating social security contributions, multiplied by 0.25%.

What is the position of Tax authorities?

It is important to note that tax authorities are very restrictive when it comes to including contributions to organisations, whose membership is voluntary, as tax-deductible. The key issue turns out to be the basis under which a given organisation operates. According to the tax authorities, it is not enough for a given organisation to operate, for example, based on the Law on Associations. They recognise that these are acts of a general nature, guaranteeing specific rights to the entire society. This was the opinion of, among others, the Director of the National Tax Information in an individual interpretation of March 9, 2022, ref. no. 0111-KDIB1-2.4010.26.2022.1.BD.

It is worth highlighting that some non-tax laws guarantee taxpayers the right to include membership fees as tax-deductible costs. As an example, Art. 6 of the Act of 23 May 1991 on employers’ organisations.

Tags Membership fees and tax expenses, tax-deductible costs in Poland