How to account employee workwear for tax purposes in the Czech Republic

Certain professions necessitate specific workwear. For individuals with the obligation to wear company clothing, understanding how to approach its purchase in terms of both accounting and tax considerations is crucial.

Several professions or businesses may enforce a policy regarding workwear as an integral part of their operations. Typically, these include professions such as builders, doctors, waiters, or housekeeping staff. Each of these occupations requires clothing specific to their respective activities. But how should the purchase of such uniforms be recorded? 

What does the Income Tax Act of the Czech Republic say about workwear

The Income Tax Law in the Czech Republic provides clear guidelines on expense application. Tax-efficient expenses are those incurred to generate, provide for, and maintain taxable income. To substantiate the use of business workwear for professional purposes, a taxpayer must furnish written company directives (internal guidelines) outlining the acquisition and use of business workwear. In cases where such directives are insufficient proof, a report detailing the use of business and professional workwear should be submitted.

Certain businesses, like those in the medical or security fields, may require employees to wear uniforms. The Labor Code permits employers in the Czech Republic to mandate uniform use, a requirement that should be clearly outlined in the company’s internal documents.

When an employer purchases work clothes for their staff, it qualifies as a tax deduction. However, the Income Tax Law specifies conditions for recognizing expenses as tax deductions.

What qualifies as workwear?

Workwear is defined as clothing distinct from regular attire. The company’s internal regulations must outline the obligation for employees to wear workwear, including its detailed description.

Uniforms can also serve as a promotional tool for a company. For instance, company logos are often applied to workwear. If standardized workwear is provided to an employee, this non-cash benefit is not subject to taxation and does not affect their salary deduction.

Dress code requirements

While not all companies need a uniform, some may have a specific dress code. For instance, law firms or government offices often expect formal attire.

Similar to uniforms, the required dress style should be outlined in internal rules. Typically, employees are responsible for buying their own clothing. Yet, some employers pitch in with a financial contribution toward the mandatory dress code.

If an employer offers a clothing allowance, it’s still up to the employee to make the purchase. However, in this scenario, the employee needs to report it as taxable income because it is subject to taxation.

Taxing clothing expenses

The idea of claiming formal wear as a tax expense can stir some debate. When a plumber buys work clothes for the job, it’s straightforward – everyone agrees they’re necessary for the work. But when a lawyer tries to list workwear as a tax expense, things can get tricky.

For formal attire to be tax-deductible, it must be solely used for business purposes. Meaning the wearer of the suit will not wear it outside of business.

 Accounting Workwear Expenses

The purchase of workwear is accounted for much like inventory. If the organization uses Method A for inventory accounting, the acquisition of workwear will be noted on the balance sheet under inventory accounts throughout the year. The issuance of workwear is then expensed as it is consumed. Posting involves accounts from account group 11 (materiál) and account group 50 (spotřebované nákupy).

For organizations opting for Method B, the transaction is recorded in the cost accounts at the time of acquisition (“rovnou do spotřeby”), still within account group 50 (spotřebované nákupy).

Regardless of the method chosen, the organization must conduct an annual inventory, register actual inventories, and establish, in internal regulations, the procedure for accounting for workwear.

Work equipment and safety gear

Many workers and entrepreneurs need various tools and equipment for their daily tasks. Essentially, anything used in business activities can be considered work equipment, from tools and computers to mobile phones and protective gear like safety glasses and respirators.

When employers provide these tools to their employees, the purchase qualifies as a tax deduction for them. These expenses contribute to the provision, maintenance, and generation of income.

Entrepreneurs using work equipment and devices for both business and personal purposes need to exercise caution. In such cases, the acquisition of these tools cannot be classified as a full expense deduction from the taxable base. Instead, the deduction must be proportional to the extent to which the tools are utilized for personal purposes.

Marketing package

Furthermore, employers have the option to reimburse employees for the wear and tear of their personal tools and work equipment. In this instance, it qualifies as a tax expense for the employer, and the employee is not subjected to taxation on this income. It’s crucial to regulate such compensation through internal documents.

Employee facilities

When an employer offers on-site amenities for meals, the associated costs are taxable. For instance, expenses related to outfitting a kitchen with a microwave oven, dishes, or a coffee machine will be deducted from the taxable base.

Source:

http://www.danovetipy.cz/clanky/detail/pracovni-obleceni-61

https://portal.pohoda.cz/dane-ucetnictvi-mzdy/dan-z-prijmu/prispevky-na-pracovni-odevy-osatne-zamestnancu/#:~:text=Za%20%E2%80%9Epracovn%C3%AD%20oble%C4%8Den%C3%AD%E2%80%9C%20je%20pova%C5%BEov%C3%A1no,firemn%C3%ADm%20logem%20apod.

https://www.podnikatel.cz/clanky/pracovni-obleceni-a-ochranne-pomucky-v-ucetnictvi-podnikatelu/

https://www.zivnostnik.cz/33/obleceni-ve-vydajich-podnikatelu-vedoucich-danovou-evidenci-uniqueidmRRWSbk196FNf8-jVUh4EnZIwasnLdRzdug1ETWhvlk/