As the accounting and fiscal closing processes are coming to an end in relation to the financial year, we draw your attention to those provisions of the CIT Act which allow preferential tax treatments on condition that the company:

  • ensures a specific accounting recognition of its result, and
  • issues compliant resolutions of its shareholders.

The preferential treatments may be barred if compliance errors occur.

One example of such regulations is Article 15cb of the CIT Act. Subject to conditions, it enables the deduction for income tax purposes of what is called deemed interest, i.e. an amount that is the product of a rate equal to 1 percentage point plus the National Bank of Poland’s reference rate in force on the last business day of the year preceding the given tax year, and of the amount:

  • of additional equity contributions to the company, made in accordance with relevant regulations, or
  • of profit retained in the company (transferred to its capital reserve or reserve capital).

Such deemed interest may be recognised as tax-deductible by reference to the year in which additional equity was so contributed or profit was so retained and/or by reference to two subsequent tax years. However, the deemed interest deduction is capped at PLN 250,000.00 per tax year. The relief does not apply where the additional equity or the retained profit is intended to absorb the accounting loss. Deemed interest may be deducted on condition the additional equity is not refunded or the retained profit is not distributed earlier than 3 years after the end of the tax year in which:

  • the equity was contributed to the company, or
  • the company adopted a resolution authorising the profit retention.

To use the relief, the taxpayer must meet the requirements of Article 15cb of the CIT Act as well as ensuring a proper accounting recognition (posting) of its result and duly issuing relevant end-of-year resolutions of its annual general meeting. For example, the preferential treatment under Article 15cb of the CIT Act may not be available unless a profit appropriation resolution is adopted with relevant content, including not only a statement that the company retains its profit but also a specific provision that it is to be transferred to its capital reserve or reserve capital.

This issue may also be relevant for other preferential tax treatments, such as the relief under Article 15(1hb) of the CIT Act, allowing taxpayers to deduct money they set aside as a dedicated investment fund that is part of their reserve capital.

If these issues pertain to your business and you are interested in our assistance, please contact us.

This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.