Expenses on food and drink served during business meetings may be tax-deductible. The condition is that the meetings have to be related to the business activity. This was the essence of the Finance Minister's general advance ruling no. DD6/033/127/SOH/2013/RD-120521 of 25 November 2013.
Tax-deductibility of expenses on business meals is highly controversial and the administrative case law is inconsistent.

In its ruling of 17 June 2013 (II FSK 702/11), the Supreme Administrative Court (SAC) stated that the expenses on business food and drink were tax-deductible. The case before the court concerned a company running a plastic manufacturing business. During the business meetings with partners, which were arranged by the company, they conducted negotiations lasting many hours. During those sessions the company provided its business partners with meals either in a restaurant or on its premises. The court stated that the company's actions were meant to create an appropriate atmosphere which undoubtedly contributed to growth in revenues. The place where the expenses were incurred was irrelevant for their tax-deductibility. The court opined that only expenses that were meant to improve the company image could be disqualified from tax-deductible costs as they were more like official entertainment expenses (Article 16(1)(28) CIT Act). This, however, was not the case here. The Supreme Administrative Court presented a similar opinion in its ruling of 16 October 2013 (II FSK 2442/13).

A divergent standpoint was expressed by, among others, the Head of Tax Chamber in Poznan in his advance tax ruling of 9 January 2013 (file no. ILPB3/423-426/12-2/JS). A company held business meetings with its partners to negotiate a contract, discuss the current portfolio and agree on transaction details. The company arranged for the meals for its business partners either on its premises or in a restaurant, depending on the meeting place. According to the company, the meals were not lavish and sumptuous. Consequently, they could not be regarded as official entertainment expenses and hence should be tax-deductible. The tax authorities rejected this argumentation. They claimed that the official entertainment is not defined by lavishness or sumptuousness. All expenses on food, drink or F&B services were, in their opinion, official entertainment expenses disqualified from tax-deductible costs. Similar conclusions drew other tax authorities in their advance tax rulings of 13 February 2013 (IBPBI/2/423-167/13/PH), 3 July 2013 (ITPB3/423-211/13/AW), 20 August 2013 (IBPBI/2/423-1023/13/AK) and 11 September 2013 (ITPB3/423-167a/13/MK).

In his general advance ruling the Finance Minister discussed a few most important aspects of tax-deductibility of business meals. Above all, he pointed out that the fact that expenses on food, drink and F&B services were listed in the regulations as examples of official entertainment expenses did not mean that they were always non-tax-deductible. This should be decided on a case-by-case basis. Such expenses should be excluded from tax-deductible costs if their sole purpose is to create good image of the company or its business or build good relationships with meeting participants. If, however, the expenses are made in order to find or secure a source of revenue, they are surely tax-deductible. Whether they are made in a restaurant or on company premises is irrelevant.

Noteworthy, this most recent general advance ruling differs from the SAC's resolution of 17 December 2012 (II FSK 702/11). The court then stated that since the expenses on food, drinks and F&B services were listed as examples of official entertainment expenses they could not be regarded as tax-deductible costs. The Finance Minister's ruling is therefore clearly more favourable to taxpayers.

It gives hopes for avoiding controversies around tax-deductibility of expenses on business meals. Unfortunately, just a day after the general advance ruling was issued, the Tax Chamber in Łódź took a position contradictory to the Finance Minister's. In the advance tax ruling of 26 November 2013 (file no. IPTPB3/423-320/13-6/MF) the Tax Chamber stated that expenses on food and drink, and on F&B services (catering) rendered at meetings with business partners and guests were official entertainment expenses regardless of where the food and drink was served and regardless of where the catering services were rendered, and as such could not be tax-deductible. The tax authority disregarded the Finance Minister's opinion expressed in the general advance ruling, that is, it did not consider the actual purpose of the meals. We can only hope that future rulings of the tax authorities will account for the Finance Minister's opinion. Summing up, it is worth knowing the main points discussed in the FM's general advance ruling as they form a good argument base in a dispute with tax authorities.

We will be glad to answer any questions if you are interested in this issue.  We can also provide comprehensive tax advisory in Poland. Our tax advisers working in Rödl & Partner offices in GdanskGliwice, Cracow, Poznan, Warsaw and Wroclaw will also answer other tax-related questions that you may have.