KPMG Weekly Tax Review 14 AUG - 21 AUG 2023

On 17 August 2023, the Regional Administrative Court in Warsaw rendered a judgment (case file III SA/Wa 716/23) stating that expenses incurred in relation to contractual penalties due to contractors because of interrupted order execution are outside the expenses that cannot be treated as tax-deductible costs, as stipulated by Article 16(1)(22) of the CIT Act. Any assumption that all contractual penalties or damages are not, due to their very nature, tax-deductible would make this provision redundant.

On 17 August 2023, the Lower House of the Polish Parliament dismissed amendments made by the Senate to the Act on the Deposit Return Scheme. According to the Act, stores over 200 m² must accept empty containers, while smaller stores may join the scheme on a voluntary basis. Moreover, a deposit will be added to selected types of bottles, the amount of which will be specified by a separate decree. Pursuant to a draft decree made available in April, the value thereof is to be set at PLN 0,50 and reimbursed at the moment of returning the containers to the store, without the need of showing a receipt. Non-collected deposits will be used to finance the scheme. Now the Act awaits the President’s signature and is expected to enter into force on 01 January 2025.

By its judgment dated 11 August 2023 (case file II FSK 175/21), the Supreme Administrative Court stated that in the case of the sale of products the price of which includes the eligible income from qualified intellectual property rights referred to in Article 24d(7)(3) the CIT Act, the income from qualified intellectual property rights will not always be equal to the value of income resulting from the full value of the net selling price of the product. According to the Court, there is a difference between selling a product including the rights in question and selling the rights themselves or licenses therefor.

On 11 August 2023, the Supreme Administrative Court issued a judgment (case file II FSK 221/21), in which it stated that the tax authority was wrong to claim that 50% tax-deductible costs can be applied only to the transfer of ownership of the invention, and not to its use. In fact, payment received by the creator, covering the right to transfer the rights to obtain a patent, should be treated as a payment for transfer of ownership rights over the invention. According to the Court, default interest is not related to the transfer of ownership rights over the invention, meaning that it cannot be subject to increased tax-deductible costs.

On 11 August 2023, the Supreme Administrative Court issued a judgment (case file II FSK 216/21), through which it resolved the issue of whether the remuneration paid under credit default swap transactions is subject to Article 21(1)(2a) of the CIT Act. In its judgment dated 28 August 2020 (case file III SA/Wa 2455/19) , the Regional Administrative Court in Warsaw stated that credit default swaps entered into by the Company perform the function of a guarantee or surety, because in the event of failure to repay the entire or part of the loan granted by the company and covered by the swap, the company will be paid the contractually agreed amount, and the loan claim will be transferred to the transferee (counterparty) by way of assignment. The Supreme Administrative Court, however, challenged the assumption that credit default swaps are similar to sureties and guaranties. Moreover, it did not share the view that in the case at hand, there is no possibility of recourse to internal systemic interpretation (Article 15e of the CIT Act).

During a session held on 17 August 2023, the Lower House of the Polish Parliament voted amendments to over 20 Acts. The Sejm passed, inter alia:

• Amendments to the act on administration of farmland property of the State Treasury and certain other acts. The amendments bring limits to trading in farmland property of over 1 ha for family foundations, founders, and beneficiaries close to the founder
• Amendments to civil proceedings, including, inter alia, introduction of e-trials as a permanent option
• Act on the Central Old-age Pension Information System
• Amendments to the PIT Act and the CIT Act, pursuant to which the depreciation period for buildings and non-building structures is reduced from 40 to 5 or 10 years respectively, depending on the unemployment rate for the district they are situated. Consequently, it will be possible to apply a depreciation rate of up to 20% annually for 5 years; and
• Amendments to the Act on Packaging and Packaging Waste and certain other acts, introducing the deposit return scheme on 01 January 2025. 

On 17 August 2023, the Regional Administrative Court in Warsaw rendered a judgment (case file III SA/Wa 583/23) in the case of a company which wanted to know whether, in relation to the transfer of its own accounts receivable to the creditor under a datio in solutum agreement, it should recognize taxable revenue on this account, in the amount of the accounts payable covered (provided that the market value of own accounts receivable does not exceed the value of the accounts payable covered). Moreover, the company wanted to know, whether it will be authorized to recognize the cost at the face value of the transferred own accounts receivable under general rules, as stipulated by Article 15(1) of the CIT Act, while Article 16(1) of the CIT Act would find no application.

According to the Court, given that the legislator introduced a special provision referring to the requirement to recognize revenue on account of gainful disposal of, inter alia, proprietary rights and, on the other hand, a limitation on the possibility to recognize tax-deductible costs of lossless incurred in relation to gainful disposal of accounts receivable, with tax consequences of rendering a performance in the form of datio in solutum subject to Article 14a(1) of the CIT Act, the transaction of gainful disposal of accounts receivable under a datio in solutum agreement shall not be subject to Article 16(1)(39) of the CIT Act, meaning that the Company will be entitled to recognize the face value of the transferred receivables as tax-deductible costs, under Article 15(1) of the CIT Act.