Entrepreneurs who supply their businesses with drinks and snacks issued to employees during their current work wonder if the expenditure on acquiring such goods can be deducted from the tax on goods and services. It turns out that everything depends on whether the employee has free access to them.
As it is known, in accordance with the provisions of the Act of 11 March 2004 on tax on goods and services (Journal of Laws of 2020, item 106 t.j. of day 23 January 2020), it is possible to deduct the tax on purchased goods and services which are linked to the taxable person's business.
Therefore, we will not deduct VAT for foodstuffs referred to as a "small meal" consumed during the current work, i.e. when the worker decides whether and when he will have them.
This was confirmed by the ECJ in its judgment of 11 December 2008 on C-371/07 Danfoss and AstraZeneca, where the Court noted that "outside the dispute it is usually up to the employee to choose the type, exact time or place to eat a meal.
The employer does not intervene in this regard, as it is only the responsibility of the employee to return to the workplace at the right time and perform his usual activities. ...
The provision of meals to workers is, in principle, intended to satisfy private needs and belongs to the sphere of choice of the employee in which the employer does not intervene.
It follows that, in normal circumstances, the provision of services consisting in the free distribution of meals to workers meets the private needs of the latter within the meaning of Article 6(2) sixth Directives’. Consequently, there are no arguments in favour of the possibility of tax deduction.
In that case, the fact that workers are "ensure appropriate working conditions" cannot be an argument.
If snacks are made available to workers freely and the employee decides when such a snack can be reached, we will have to meet the personal objectives of the employee and in that case VAT deduction will not be possible
The purchase to an undertaking of goods such as sweets, fruit, vegetables and other items used as small snacks which are made available free of charge to employees is not related to the activities carried out by the company. Therefore, since the expenditure on the acquisition of the abovementioned goods is not related to the sale of taxed goods and services in the course of the business, the company is not entitled to deduct the input tax resulting from invoices documenting the expenditure incurred.
A meal during meetings can be deducted
It turns out that the exception to this is to spend a meal during internal meetings (training, meetings). This is confirmed by Individulan's interpretation of the sign.
0111-KDIB3-1.4012.662.2017.3.AB, which indicates that in order to indicate that certain purchases have an indirect link with the activity of the entity, there must be a causal link between the purchases of goods and services made and the establishment of the turnover.
Here it should be stated that the use of food items (coffee, tea, sugar, milk, water, juices, small snacks) by employees during business meetings at the company, i.e. conferences, meetings trainings, board meetings, does not bear personal, private use of these persons.
In the case of employees, they belong to the group of entities mentioned in Article 7(2)(1) VAT Act, but the above-mentioned foodstuffs which the company transmits do not serve the private purposes of those persons, as their consumption is related to the status of employee in the company.
Thus, according to the tax authorities, food products in the form of snacks, consumed by employees during internal meetings (trainings, meetings), will be linked (indirect) to the performance of taxed activities, because by influencing the general functioning of the company as a whole, they will contribute to the generation of turnover. Thus, the company will be able to reduce the amount of tax due by the amount of input tax due in connection with the purchase of foodstuffs for the needs of workers who are consumed by them as small meals during internal meetings (trainings, meetings), due to the fact that the expenditure incurred will serve indirectly to carry out activities taxed on goods and services.
The employer may deduct VAT from drinks purchased for employees
Finally, it is worth noting that food items such as water, milk, coffee or tea left in the kitchen for the preparation of cold and hot drinks on their own by employees during working hours will not serve to satisfy the personal purposes of employees, as was the case with snacks.
The need for the employer to provide drinks to their employees at work derives directly from the provisions of the established regulation of the Minister of Labour and Social Policy on general health and safety at work, thus not making these activities available Article 7(2) VAT Act and not taxable.
Therefore, the company will be able to deduct VAT on these products.
In summary, if snacks are made available to workers freely and the worker decides when he can reach out for such a snack, we will have to meet the employee's personal objectives and in this case VAT deduction will not be possible.
However, as mentioned above, the exception is when the treat will be served during business meetings at the company, i.e. conference, meeting training, board meetings. In such a situation, there is no way to satisfy the employee's personal objectives – the consumption of snacks will be related to the status of employee in the company.
Therefore, when snacks are served during business meetings, VAT can be deducted from them.
Finally, it is worth mentioning that leaving cold and hot drinks prepared by employees on their own during working hours in kitchen spaces will not satisfy the personal objectives of employees and it will not matter whether the employee decides when such a drink can reach, so in this case it will also be possible to deduct VAT.
Author: Paweł Boś
Junior Tax Consultant, associated with Russell Bedford Poland from 2018. Author of numerous articles on legal and tax matters, published in the industry press. Law student at Leon Kozminski Academy in Warsaw