Magdalena Kostowska, Mateusz Weiss
Rzeczpospolita

Article 15e of the CIT Act limited the deductibility of the costs of so-called intangible services purchased from related parties. After the article was repealed on 1 January 2022 taxpayers were in doubt about how to treat excess costs of this type which were not deducted in previous years (the annual deduction limit was PLN 3 million + 3% of tax EBITDA).

Striving to protect vested interests, the lawmakers ensured that such costs incurred between 2018 and 2021 but not deducted due to the limit could be carried forward for deduction over a period of five years. This right was given in Article 60 of the Amending Act of 29 October 2021. However, the transitional provision was based on a not particularly felicitous reference, with businesses that did not deduct the excess costs up to and including 2021 retaining the right to do so after 31 December 2021 but within the scope and under the rules laid down in the repealed Article 15e(9).

This has led to doubts regarding the practical application of the right to deduct intangible service cost carry-forwards. Three interpretations of Article 60 of the Amending Act emerged among taxpayers:

  • Approach 1 (Aggressive) – all the costs may be deducted on a one-off basis in any one tax year of the five-year carry-forward period.
  • Approach 2 (Balanced) – the costs may be deducted up to a deemed limit (PLN 3M + 3% of tax EBITDA) in each tax year of the five-year carry-forward period.
  • Approach 3 (Conservative) – the costs may be deducted up to a deemed limit (PLN 3M + 3% of tax EBITDA), except that the limit includes not only carry-forwards but also those intangible service costs, as they were understood under the repealed Article 15e, which are incurred in or after 2022.

The tax administration has recently been striving to streamline its approach to the matter. While it rejects the Aggressive approach, it is inclined to accept the Balanced one (see private tax rulings dated 15 Sep 2022, ref. 0111-KDIB1-2.4010.505.2022.1.AK, 21 Jul 2022, ref. 0111-KDIB1-2.4010. 286.2022.1.EJ, and 25 Jul 2022).