What was the case about?
The taxpayer ran a sole proprietorship providing legal services.
The taxpayer’s business was her sole source of income. The business was based in town A, where the taxpayer was also registered as a resident. Due to the nature of the profession and the structure of the legal market in the town where the business was based, the taxpayer was forced to seek clients outside the area where the business was based.
Under a cooperation agreement, the taxpayer entered into a partnership with a client whose registered office was in town B, situated approximately 160 km from town A. Under the agreement, the taxpayer was obliged to provide services to the client at the client’s registered office in town B, from Monday to Friday.
Due to the considerable distance between the taxpayer’s place of business and the registered office of the contractor with whom the taxpayer had entered into cooperation, in order to minimise business costs related to travel and accommodation and to ensure the proper and timely performance of her duties, the taxpayer rented a flat in town B, in close proximity to the contractor’s registered office.
The premises rented by the taxpayer were residential premises, and the taxpayer will not be conducting any business activity there. The premises were used for residential purposes in connection with the establishment of cooperation with the contractor. The tenancy is confirmed by a contract.
In light of the above description of the case, the taxpayer approached the Director of the National Tax Information Service with an enquiry as to whether the expenses incurred in respect of the rental of the flat in B., i.e. the rent and utility charges, constitute tax-deductible costs within the meaning of Article 22(1) of the PIT Act?
In the taxpayer’s view
The taxpayer took the position that the expenses incurred in connection with the rental of a flat in B. (including the rental fee, rent and service charges) constitute tax-deductible costs within the meaning of Article 22(1) of the PIT Act. The taxpayer justified her position by arguing that the expenses in question constitute reasonable and rational expenses related to her business activity, incurred for the purpose of obtaining, maintaining or securing income.
In the opinion of the Director of National Tax Information
The Director of National Tax Information accepted the taxpayer’s position as correct, without providing a legal justification for this assessment.
The interpretation in question, which is clearly favourable to taxpayers, is not an exception to the rule. The Director of National Tax Information has expressed a similar view in other decisions, including the individual interpretation of 18 February 2022, ref. no. 0113-KDIPT2-1.4011.1091.2021.2.RK, or the interpretation of 7 October 2020, ref. no. 0113-KDIPT2-1.4011.697.2020.1.AP.
This is therefore good news, particularly for all those taxpayers who have hitherto combined the possibility of deducting rent as a tax expense with the relocation of their business premises to the address of the rented flat (which was sometimes not possible due to restrictions arising from tenancy agreements, or which taxpayers were discouraged from doing by the thought of update obligations, including those relating to the CEIDG or VAT).
Frequently asked questions
Can I include rent for renting an apartment in another city, where I must provide services for a contractor, as a tax-deductible expense?
Yes, expenses for renting residential premises in a location distant from the company’s registered office may constitute a tax-deductible expense. The condition is to demonstrate that the rental is justified by the specifics of the business activity and the necessity of regular presence at the place of service provision.
Do I need to have my company’s registered office in the rented apartment to include rent as a tax-deductible expense?
No, there is no obligation to conduct business activity in the rented premises. It is sufficient that the apartment serves residential purposes related to performing professional duties, for example, due to the large distance from the company’s registered office.
What expenses related to apartment rental can I include as tax-deductible expenses?
Tax-deductible expenses may include both rental fees and utility charges as well as other operating expenses. It is important that the rental relationship is confirmed by a written agreement.
Does this tax interpretation apply only to lawyers and other professions of public trust?
No, the presented example concerns a taxpayer conducting legal activity, however this principle may apply to other persons. The key is to demonstrate that the rental is necessary for proper and timely performance of professional duties.
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I specialize in Polish tax law, particularly income taxes, as well as international tax law. My experience includes, among others. providing ongoing tax advisory services, preparing legal and tax opinions, drafting requests for individual interpretations, conducting tax reviews. I gained professional experience in Warsaw law firms.
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