Partially paid benefits

A bonus for the employee, a tax risk for the employer

Are employees or associates in your organization provided with any benefits by the company for which they pay only partial consideration or nothing at all? The benefits in question include for instance:

medical care,
insurance,
gym membership cards,
tickets for cultural or sports events,
prepaid café cards,
language trainings,
cooking classes,
massage treatments,
psychological consultations.

Note - if a company offers the above or similar benefits to employees for partial payment, it must correctly report them for tax purposes.

VAT issues

A recent judgment of the Supreme Administrative Court in this case is of particularly importance (case file no. I FSK 230/18), pursuant to which the employer should disclose the VAT tax base for partially paid benefits at their market value.

How may this affect your company?

Since partially paid benefits for employees / associates must be disclosed for VAT purposes at market value, this may raise a number of practical doubts:

Should settlements for past periods be adjusted?
Does reporting the full value of a benefit also apply to prepaid medical services and group insurance?
Have VAT returns and records proved to be unreliable?
Will a change in the reported value of benefits have an impact on the proportion of VAT deduction?
Does the problem concern also benefits co-financed from the Company Social Benefit Fund?

PIT and ZUS Social Security risks

Benefits for employees/associates also involve the obligation to properly declare their value for PIT and ZUS Social Security purposes. Thus, a question arises as to according to what principles should they be valued for employee tax purposes, especially in the context of the above ruling?

It is worth remembering that under specific assumptions, the value of certain benefits may be fully or partially exempted from social security contributions and/or PIT. This applies in particular to partially paid benefits (e.g. medical service packages, fitness club membership cards, life insurance).

What is worth paying attention to in terms of CIT?

Company expenditure that aims to build relationships with employees or contractors are a rapidly growing area. Therefore, it is always necessary to assess to what extent a company’s activities will constitute tax deductible costs, and to what extent they cannot be qualified in this way.

How can we help you?

Company expenses other than salaries and those related to broadly defined employment are a task not only for the HR department. New types of employer activities have emerged in recent months. The tax implications not only emerge in labour law, but also in many tax areas. Therefore, we offer to assess the requirements and obligations together in all fiscal areas: VAT, PIT, ZUS Social Security and CIT. VAT, PIT, ZUS Social Security and CIT.

We will help you:

identify those benefits that can be excluded from VAT taxation,
determine which benefits may be covered by PIT or ZUS Social Security exemption, or be treated as not constituting revenue at all and under what conditions
determine the liability in PIT and ZUS Social Security if the exemption cannot be applied,
develop a substantiation for classifying as much of the employee expenses as possible as a CIT-deductible expenses.

With our holistic approach, the substantiation and qualification adopted in each of these areas will be consistent.