Supreme Administrative Court confirms: income from doctor, PIT-11 from pharmaceutical company
A doctor, taking part in training courses organized and financed by a company, at which this company advertises its products and equipment, obtains a gratuitous benefit, this is what the Supreme Administrative Court ruled in the judgment of 2 June 2022 no. II FSK 2547/19. It was pointed out that the decisive factors are the voluntary use of the benefit by the recipient and the creation of a tangible economic benefit on his part. This is yet another time that the courts have agreed with the tax authorities’ pro-fiscal approach.
The judgment cited above concerned a pharmaceutical company that organizes medical workshops, as well as training for doctors and nurses. During such events, it provides participants with accommodation, transportation to and from the training site, as well as food. In addition, the company finances doctors’ participation in congresses, training and scientific conferences organized by third-party companies, covering costs such as registration fee, accommodation, transportation, travel insurance. Invoices for such expenses are issued directly to the company and it pays them – to the issuer’s account.
The training itself is conducted by an employee of the company or a doctor (who is not an employee of the company), with whom a contract of assignment is concluded. During the classes the lecturer may use products or medical equipment distributed by the company. Expenses related to the lecturer’s accommodation, transportation or meals are also borne by the company and invoiced to it.
In a request for an individual interpretation, the company asked whether, by covering for participants all costs related to the organization and participation in the training, it is required to issue PIT-8C (now PIT-11) to participants on this account. The same question was asked with regard to the company’s payment of the costs of doctors’ participation in conferences organized by third-party companies. However, with regard to lecturers (who are not employees of the company), the company asked whether the PIT-11 issued to such a person should include only income corresponding to the amount of remuneration specified in the contract, or also costs related to the execution of the order, such as transportation, accommodation, meals – which were provided by the company.
According to the applicant, in a situation where it pays doctors and trainees the cost of their participation in the event, no income from gratuitous benefits arises on their side, which should be shown in the PIT-8C information (PIT-11). This was justified by the fact that the participation of people in such training courses, conferences or congresses is in the interest of the company, not the participant, that is, the doctor. Participation of medics is necessary, but only in the role of addressees of advertising activities, for example, presenting the products offered and how to use them.
There is no activity, there is revenue
The director of the KIS (national tax administration) acknowledged that for lecturers who are entrepreneurs, the company is not obliged to issue PIT-8C (PIT-11) information for unpaid benefits. The situation will be different for lecturers who are not entrepreneurs. In their case, income will arise
Doctors who voluntarily attend the conference gain knowledge of the treatment products offered by the applicant company, as a result of which they gain additional expertise that they can use in their earning activities, with the tangible effect of increasing their earning capacity. As the court pointed out, it is clear that this kind of benefit has a measurable economic value.
For the rest, the authority found the company’s position incorrect. In justification, the tax authority cited the Constitutional Tribunal’s judgment of July 8, 2014. (ref. K 7/13), referring to the conditions that should be met in order for an employee’s gratuitous benefit to qualify as income from the employment relationship. Significantly, the Director of the KIS considered that, despite the fact that in the case under review there was no employment relationship between the company and the doctors, all of the prerequisites listed in the Tribunal’s ruling were met. Consequently, in the opinion of the fiscal, the doctors participating in the training courses and workshops receive income from gratuitous benefits, which should be classified as income “from other sources”.
Courts agree with the fiscal
The Regional Administrative Court in Warsaw in judgment of 14 March 2019 (no. III SA/Wa 866/18) agreed with the Director of the KIS, dismissing the company’s complaint. Also, the court referred to the July 8, 2014 judgment of the Constitutional Tribunal, explaining that the conclusions expressed by the Tribunal also apply to unpaid benefits that are made outside the employment relationship.
The Supreme Administrative Court took a similar view, dismissing the cassation appeal filed by the company. In the justification for the judgment, it pointed out that, as a rule, the occurrence of income from a gratuitous benefit is determined – as in the case in question – by the voluntary use of the benefit by the entity receiving it and the creation of a tangible economic benefit on its part, which, according to objective benchmarks, can be considered an economic benefit. The SAC agreed with the position of the WSA, whose opinion was that doctors who voluntarily participate in the conference gain knowledge of the treatment products offered by the applicant company, as a result of which they obtain additional expertise that they can use in their gainful activity, the tangible effect of which is an increase in their earning capacity. As the court pointed out, it is obvious that this kind of benefit has a measurable economic value, since improving skills by attending scientific conferences is associated with incurring participation costs. Doctors attending conferences do not incur this cost, as they receive “conference benefits” for free through the applicant. The same situation applies to lecturing doctors.
The ruling is not surprising and does not deviate from previous case law. The effect of this approach is that PIT-11s must be issued to sponsored beneficiaries – unless tax exemptions apply to the benefits received.