Possibility of deducting expenses for a horse and a Swiss watch as tax-deductible costs

October 2, 2024

Can the expenses for purchasing a horse be included in tax-deductible costs?
This question was raised by an applicant in a ruling dated June 19, 2024, 0112-KDIL2-2.4011.320.2024.5.AG, who planned to purchase a horse for herself and her employees.

A new era of benefits?

The applicant argued that horseback riding is the best form of relaxation after eight hours of work at a computer. It helps maintain a straight posture, improves motor coordination, calms, and reduces stress. Employees would be able to ride the horse on days and at times of their choosing. This is intended to be a form of relaxation and rest, which would translate into work efficiency.

The response of the tax authority

The tax authority partially agreed with the applicant, stating that she could include the expenses for purchasing the horse as tax-deductible costs for the portion related to the employees. Expenses on the horse, incurred to offer employees non-monetary benefits that contribute to improving their mental and physical health, reducing stress, and ultimately increasing productivity and work efficiency, can meet the definition of tax-deductible costs.

Tax-deductible expenses and the horse

However, regarding the applicant’s use of the horse, the authority indicated that the expense cannot be considered tax-deductible because it is of a personal nature. While horseback riding may positively impact health and well-being, taking care of one’s health is a basic human need. Therefore, in the case of a business owner, such an expense is not related to the business activity and cannot be tax-deductible in that portion.

Swiss watch as a tax-deductible expense

In another decision, the authority took a positive stance regarding the inclusion of the cost of purchasing a mechanical Swiss watch for over 5,500 PLN as tax-deductible. An attorney who deals with criminal cases requested the ruling, arguing that the nature of his work requires maintaining security and confidentiality. Additionally, some trials and hearings are held in camera, meaning electronic devices cannot be brought in. As an attorney, he must accurately note the time spent on work, as this determines his remuneration.

What does the tax authority say?

In the ruling dated May 9, 2023, 0113-KDIPT2-1.4011.183.2023.4.AP, the Director of the National Tax Information (KIS) stated that the applicant could include the expense for the watch as a tax-deductible cost, as it is not listed in the catalog of non-deductible expenses. Additionally, the authority emphasized that this expense is not of a representational nature, as it does not aim to create an image or foster positive relationships with clients.

As the above shows, sometimes building the right argumentation will determine whether “unusual” expenses can be included as tax-deductible costs.

Tags individual tax ruling, koszty podatkowe, tax expenses, tax-deductible costs in Poland