Employer-funded professional development of employees may raise tax concerns both on the employee’s side (taxable income and potential exemption) and on the employer’s side (tax-deductible expenses and eligibility for tax incentives). In tax rulings, the tax authorities often adopt a taxpayer-friendly approach; however, the statutory conditions must be met.
The case concerned an individual acting as a court enforcement officer (bailiff) who chose to tax income from her business activity under the flat-rate PIT regime provided for in Article 30c of the Polish PIT Act. One of the employees of her bailiff’s office decided, on their own initiative, to begin a master’s degree programme.
Although the applicant did not participate in making this decision, she recognized the value of improving the employee’s qualifications and considered it important for the proper performance of duties within the office. Consequently, she entered into an agreement with the employee regarding the financing of the studies and undertook to cover all tuition-related costs.
The financing mechanism was structured so that the employee initially paid the tuition fees themselves. The university then issued an invoice to the bailiff’s office, and the applicant reimbursed the employee based on that invoice.
Against this background, doubts arose as to whether the amount reimbursed to the employee constituted taxable income eligible for the exemption under Article 21(1)(90) of the PIT Act. Additionally, the applicant sought confirmation as to whether the expenditure on the employee’s studies could be treated as a tax-deductible expense and whether it could qualify for the sponsorship tax relief provided for in Article 26ha of the CIT Act.
In presenting her position, the applicant argued that Article 21(1)(90) exempts from taxation the value of benefits granted for the purpose of improving professional qualifications. Such improvement is defined as acquiring or supplementing knowledge and skills by an employee, either on their own initiative or with the employer’s consent. According to the applicant, these conditions were met in the case at hand. The employee independently decided to undertake the studies in order to acquire knowledge necessary for their work in the office.
Regarding tax-deductible expenses, the applicant argued that all statutory requirements were fulfilled. Funding the employee’s studies was intended to improve their knowledge and qualifications, which would directly affect the quality of their work. This would reduce the number of mistakes made by the employee and improve the efficiency of the applicant’s operations as a bailiff. Therefore, the expense was incurred for the purpose of generating, securing, or preserving a source of income. Furthermore, the expenditure was properly documented through invoices and proof of payment.
With respect to the sponsorship relief, the applicant pointed out that expenses supporting higher education and science include costs incurred for financing fees referred to in Article 163(2) of the Law on Higher Education and Science, provided that such fees are specified in an agreement between the educational institution and the individual undertaking the studies. In her opinion, the expenses incurred to finance the employee’s university education should qualify as activities supporting higher education.
In the tax ruling, the tax authority fully agreed with the applicant’s position.
Regarding the first issue, the authority confirmed that the amounts reimbursed to the employee constituted employment income within the meaning of Article 12(1) of the PIT Act. However, such income qualified for the exemption under Article 21(1)(90) of the PIT Act. As a result, the applicant was not required to calculate, withhold, or remit advance personal income tax on these amounts.
As for the deductibility of the expenses, the authority noted that the applicant and the employee had entered into an agreement under which the applicant covered 100% of the tuition fees. Since the expenditure served to improve the employee’s professional qualifications, it was directly related to the applicant’s bailiff practice. A better-educated employee was more capable of meeting the requirements of the position, including those involving knowledge of administrative law.
The authority also emphasized that a bailiff’s office is not a business that relies solely on equipment and software; it requires appropriately qualified personnel. Consequently, although the expenses could not be linked to a specific item of income, they were sufficiently connected with the business activity. Therefore, provided that they were actually incurred and properly documented, they could be recognized as tax-deductible expenses.
Finally, addressing the sponsorship relief, the authority referred to the relevant statutory provisions, under which fees for postgraduate education, specialist training, and other forms of education may qualify for the relief. According to the authority, the expenses incurred by the applicant under the agreement financing the employee’s university studies constituted fees of the type covered by these provisions.
As a result, the costs could be classified as expenses supporting higher education and science and, consequently, could benefit from an additional deduction from the tax base under the sponsorship relief provisions.