Poland: Limit on tax-deductible debt financing costs (court decision)

A court decision concerning the limit on tax-deductible debt financing costs

A court decision concerning the limit on tax-deductible debt financing costs

The Polish Supreme Administrative Court again held that in situations when the surplus of debt financing costs in taxable activities does not exceed PLN 3 million in a tax year, the taxpayer has the right to include the total debt financing amount in tax-deductible costs. And if the surplus exceeds PLN 3 million, then under Article 15c of the Polish Corporate Income Tax Act, the cap on the excess of the debt financing costs need to be set as a total of PLN 3 million and 30% of tax earnings before interests, tax, depreciation and amortization (EBITDA).

The case identifying information is: II FSK 1558/19 (3 March 2022)

Tax authorities historically have taken a position unfavorable to taxpayers, under which the limit on tax-deductible costs is the higher of PLN 3 million or 30% of tax EBITDA. However, administrative courts tend to adopt a different approach, stemming from the literal interpretation of the material provisions, and hold that the limit on debt financing costs need to be calculated as a sum of PLN 3 million and 30% of tax EBITDA.

Read a March 2022 report [PDF 255 KB] prepared by the KPMG member firm in Poland


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