THE DEDUCTIBILITY RESTRICTION ON INTANGIBLES APPLIES ALSO TO AMORTISATION EXPENSES

This is to let you know of a taxpayer-unfriendly tax ruling issued on 11.01.2018 (0111-KDIB1-2.4010.448.2017.1.AW), where the Director of National Revenue Information ("Authority") stated that the restriction (in force since 1 January 2018) on the deductibility of expenses incurred to purchase intangibles applies also to amortisation charges on an intercompany license.

The ruling was applied for by a company which wanted to produce goods under an industrial design license from its affiliate. The company planned to record the license as its intangible and deduct all of the related amortisation charges for tax purposes.

But the Authority did not agree with such treatment, saying that the new restriction on the tax deductibility of amounts paid for intangibles (including any kind of fees or royalties payable for use or right of use thereof) directly or indirectly to affiliated entities or entities based in tax havens applies also to amortisation charges on such assets.

Therefore, for tax purposes, the company can deduct amortisation on its intercompany license, subject to the restriction imposed by Article 15e of the CIT Act, i.e. it can deduct the full expense of no more than PLN 3 million annually while any amount in excess of this threshold can be deducted only to the extent it does not exceed 5% of tax EBITDA.

If this issue pertains to your business and you are interested in our assistance, please contact your WTS&SAJA consultant or our office. 

 

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