Acquiring and serving foreign clients often requires knowledge of foreign languages. But will the costs of learning them be considered tax-deductible for business purposes?
A tax advisory and accounting businesswoman submitted this very question to the Director of the National Tax Information Service. In her application for a tax ruling, she indicated that she also serves foreign clients. This service is typically provided in English, meaning that in order to obtain and fulfill assignments within her scope of business, she must speak English at the highest possible level, enabling her to communicate fluently with foreign clients and prepare necessary written materials in English for them (including opinions, analyses, explanations, and meeting summaries). In her business activities, the applicant requires knowledge of both general and specialized English, including legal and business English.
In connection with her foreign language learning, the applicant incurs expenses for English classes conducted by a teacher, the purchase of necessary English learning materials such as textbooks, tests, and flashcards, as well as access to an English learning platform that allows students to create their own sets of words and phrases for learning. All expenses are documented with invoices.
In the issued individual interpretation, the authority stated that in order for a given expense to be recognised as a tax deductible cost, it must meet the following conditions:
- be incurred by the taxpayer, i.e. ultimately it must be covered from the taxpayer's assets (expenses incurred for the taxpayer's activities by persons other than the taxpayer do not constitute tax-deductible costs for the taxpayer),
- is definitive (actual), i.e. the value of the expense incurred has not been reimbursed to the taxpayer in any way,
- is related to the business activity conducted by the taxpayer,
- was incurred in order to obtain, maintain or secure revenues or may have an impact on the amount of revenues achieved,
- has been properly documented,
- cannot be included in the group of expenses which, in accordance with Article 23 paragraph 1 of the aforementioned Act, are not considered tax deductible costs.
The eligibility of a specific expense as a tax-deductible cost depends on a thorough and comprehensive assessment of whether, in light of all the circumstances, and with due diligence, the taxpayer could and should have foreseen at the time of incurring the expense that it would contribute to generating, preserving, or securing income. Not every expense incurred by a taxpayer in connection with their business activities is deductible from the tax base, but only those expenses that are causally related in such a way that their incurrence had or could have had an impact on generating or increasing the relevant income.
Finally, the Director of the National Tax Information Service indicated that since the applicant, in order to provide her services, must speak English at the highest level, using specialist language, i.e. legal and business language, and the expenses incurred for language training will allow her to generate income and maintain a source of income, these expenses can be included in tax-deductible costs in accordance with Article 22, Section 1 of the Personal Income Tax Act.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of August 19, 2024.
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