The Corporate Income Tax Act (“CITA”) has been amended by an act of 7 October 2022 (“New Law”) to change the rules governing the deductibility of borrowing costs, i.e. Articles 15c(1) and 16(1)(13f) CITA.
This part of the New Law operates retroactively as it applies to borrowing costs incurred on or after 1 January 2022 or as of the tax year beginning next after that date for taxpayers whose tax years do not coincide with the calendar year.
The revision to Article 15c(1) CITA is designed to add clarity so that now this law expressly states that the non-deductible portion of borrowing costs is that which exceeds the higher of PLN 3 million or 30% of tax EBITDA. Previously taxpayers had doubts about whether they have a choice between the two thresholds or must always apply the lower of the two.
Article 16(1)(13f) CITA prohibits the deduction of borrowing costs of funding received from a related party to the extent the funding has been used for capital transactions.
The New Law changes this provision to make it more liberal. In its new version, Article 16(1)(13f) CITA does not apply to borrowing costs of funding which:
- has been provided for acquisition of shares or interests in unrelated parties, including acquisition of further shares if such acquisition occurs within 12 months from when the first shares in a given entity were acquired;
- comes from a bank or cooperative savings and loans association established in an EU or EEA country.
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