The beginning of the school and academic year is an occasion to question the tax characteristics of entrepreneurial expenses for the payment of scholarships to students and pupils. Our tax legislation regulates several types of tax-free scholarships that can be paid to high school students and university students up to the prescribed amounts, as long as they are regularly enrolled, and some types of scholarships also apply to postgraduates, doctoral candidates, and researchers.
In practice, scholarships are most often paid to students and pupils, tax-free up to 600 euros per month. The scholarship payer can enter into a contract with the student or pupil whereby both parties assume certain obligations, usually the obligation of employment after completing their education, but this is not a condition for tax-free payment.
What is allowed
An entrepreneur can make a decision on the payment of a scholarship as a unilateral act whereby they commit to paying the scholarship, under conditions and for a duration that they determine themselves. In both cases, the payer must have proof of regular enrollment in high school or a higher education institution. There is no obstacle to the scholarship being paid as support for the education of a close person with whom the entrepreneur is related. There does not need to be any connection between the type of education for which the student is being educated and the activity performed by the scholarship payer. The amounts paid for the purposes of determining tax-deductible expenses are considered justified expenses that reduce the tax base for profit for the entrepreneur, and for individuals performing independent activities, they are considered justified expenditures. There are no restrictions on the number of students and pupils to whom scholarships can be paid, nor is the paid amount limited by the size of the entrepreneur.
Students and pupils can receive scholarships from multiple payers, but even then, the tax-free amount is limited to 600 euros per month in total from all payers. A student or pupil receiving a scholarship from one payer is obliged to provide a statement that they are not receiving a scholarship from other payers. If they receive it from two or more payers, they must inform them, and if the total amount exceeds 600 euros per month, they are obliged to choose, with an appropriate statement, which payer they will use the right to tax-free income from.
Can be retroactive, not in advance
Scholarships paid to students who achieve notable results in knowledge and grades and are selected through a public competition to which all students could apply under equal conditions are under a special tax regime. Competitions are usually, but not exclusively, announced by municipalities and cities to encourage success in education, retain young people after completing their education, motivate for education in deficit professions, etc. These scholarships are more favorable, tax-free up to 900 euros per month. Moreover, receiving a scholarship obtained through a public competition excludes the possibility of receiving a tax-free scholarship that is not conditioned by a public competition. The student must choose which scholarship they will receive tax-free, and the other will be taxed as other income.
