St. Andrew's Day, which we'll be celebrating in a few days, is a holiday of folk origin. It's primarily associated with a lavish ball and an evening of fortune-telling. Traditionally, these fortune-telling sessions are for matrimonial purposes. But why not try to predict what awaits us in the coming year? How will tax changes affect our business?
Those who don't want to rely on amateur fortune-telling can use the services of professional fortune-tellers. This is precisely what the partners of one company did, subsequently requesting a tax ruling regarding the impact of using fortune-telling services on the company's taxation. In their request, they asked whether expenses for such services could be included in tax-deductible costs.
The applicants believed so. They argued that fortune-telling constitutes a type of advisory service. They cited other tax interpretations in which the Director of the National Tax Information Service stated that strategic consulting services, including market analysis, conducting meetings and market interviews, identifying, assessing, and selecting available development options on international markets, and creating and updating a long-term international development strategy, constitute tax-deductible costs. These expenses are incurred for the purpose of company development, which will result in increased revenue and secure its source. The services of a professional fortune-teller are, in essence, very similar to strategic consulting services. They are acquired for the purpose of creating and updating a company's development strategy, analyzing the market in which the company operates, or identifying, assessing, and selecting available development options.
In the applicant's opinion, the "purpose" of increasing or securing the source of revenue, which the expense classified as tax-deductible, is intended to serve, should be assessed subjectively, from the taxpayer's perspective. Therefore, it is the taxpayer who decides whether the expense incurred constitutes a tax-deductible cost or not. Furthermore, using the services of a professional fortune teller allows for the development of forecasts and strategies for the future of the company's operations. Using fortune-telling services (despite their esoteric nature) can contribute to generating income and also securing its source.
The Director of the National Tax Information Service (KSI) disagreed with the company's arguments. In an interpretation issued on October 10, 2024 (ref. 0111-KDIB2-1.4010.441.2024.1.AJ), he stated that a tax-deductible expense is an expense that is purposeful and rationally justified. The taxpayer must demonstrate both its purposefulness and rationality. When determining tax-deductible costs, expenses whose nature raises doubts cannot be recognized as tax-deductible costs. Simply using the services of a professional fortune teller to decide on the company's development direction, service portfolio, method of reaching new clients and markets, or support in recruiting new employees does not guarantee increased revenue or the preservation or securing of a source of revenue. Predictions and predictions are inherently random and will not translate into measurable revenue from business activities or the preservation or securing of a source of revenue. A fortune teller relies on intuition, symbolism, and techniques they know and practice, but this knowledge is not based on science. Fortune-telling services are the opposite of professional consulting, which is based on science and knowledge acquired by professional advisors with specific education and professional experience confirmed by appropriate titles. Consulting services are formalized services for which legal standards for such activities have been established. Professional consulting encompasses the provision of expert advice, reflected (expressed) in opinions, analyses, or research. Therefore, expenses incurred for fortune-telling services cannot be included in tax-deductible costs.
As the interpretation presented suggests, pouring wax through a key will be a cheaper way to predict the future. Perhaps the prediction will concern simple and low taxes? That's what we hope for you and ourselves.
As the end of the year approaches, starting next Monday we will be presenting assumptions about upcoming tax changes in 2025. We invite you to read them now.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 22, 2024
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