Donuts included in company expenses. The tax office says “yes”, but on one condition

Can donuts and faworki reduce your tax? Yes, but not in every situation. The tax authorities allow expenses for sweet refreshments to be included in tax deductible costs if they are of an integration nature or are related to business meetings.

Fat Thursday is not only a tradition in many companies, but also a permanent element of office reality. Donuts and sweets appear on the tables for employees and contractors. However, the well-known question returns: can such expenses be classified as tax deductible costs?

Donuts included in company costs?

– If the employer buys sweets and offers them to his employees, such a gesture translates into better team integration and has a positive impact on the atmosphere. Therefore, as indicated by the tax authorities, such employee expense is of an integration and motivational nature and constitutes a tax-deductible cost – explains Monika Piątkowska, e-pity tax advisor.

The same will be the case refreshments during meetings with contractors. In such a case the purchase of donuts may also constitute a tax expense, provided that it does not bear any signs of representation. The expert emphasizes that jIf we eat donuts or faworki during, for example, a business meeting during which we establish the terms of cooperation, such a meal is a tax-deductible expense for us.

Buying a donut is not always an expense

– But if the meeting with the contractor is of a representative natureand its goal is to create a positive image of the company, then spending on sweets we should not include it in the settlements – he points out Monika Piątkowska.

What about VAT on donuts?

Another tax issue concerns the tax on goods and services. The tax advisor emphasizes that if we buy donuts and offer them to employees, the tax office is of the opinion that the entrepreneur is not entitled to deduct VAT from such expenses.

However, the situation is different if the entrepreneur purchased sweets to give to customers. “Then the taxpayer has the opportunity to deduct VAT on food purchased as refreshments during a meeting with a clientthat is directly or indirectly related to business activity, e.g. during negotiations, presentation of products or services,” explains the expert.

Faworki and donuts and employee's income

– How the employee receives the treat determines its taxation. A free benefit may constitute the employee's income, provided that its exact value can be determined. Therefore, if an employee receives a personalized gift, e.g. a box of sweets, it is possible to estimate its value and determine the income. However, if the employer puts out a public tray of donuts at the company's headquarters, it is difficult to determine how much sweetness a specific person consumed. In such a situation the value of the benefit cannot be assigned to a given employeewhich means that no income is generated on his side – he adds Piątkowska.

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