Taxpayers whose tax year coincides with calendar year welcomed 1 January 2022 as this was when the controversial Article 15e of the CIT Act lost its force. This rule imposed a limit on the tax deductibility of the costs of so-called intangible services (such as advisory, market research, advertising, management and control, data processing, licensing), which was PLN 3 million + 5% of “tax” EBITDA annually. However, costs in excess of the limit and not deducted in one tax year could be carried forward to be deducted over the next 5 tax years in accordance with the repealed rule, always subject to the annual deduction limit.
Striving to protect vested interests, the lawmakers ensured that businesses carrying forward undeducted excess costs had the right to deduct them, but within the scope and under the rules laid down in the repealed Article 15e(9).
The drafting of the transitional provision was not particularly felicitous so that an interpretation split has emerged regarding the treatment of intangible service costs carried forward from previous years (2018-2021).
As can be seen in its recent tax rulings, the tax administration is striving to streamline its approach to the matter. According to these rulings, intangible service cost carry-forwards are available for deduction up to the “hypothetical limit” of PLN 3M + 5% of “tax” EBITDA, as applicable in the given tax year (private tax ruling of 15 Sep 2022, ref. 0111-KDIB1-2.4010.505.2022.1.AK).
As regards the question whether the limit should also include intangible service costs incurred as of 1 January 2022, the tax administration agrees that, not being subject to the limit, current costs do not need to be taken into account when testing the “hypothetical limit” in the given tax year (private tax ruling of 20 Sep 2022, ref. 0111-KDIB2-1.4010.486.2022.1.BJ).
If this issue pertains to your business and you are interested in our assistance, please contact us.
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