Adjustment of Direct Costs in Poland – Regulatory Gap
While filling out the CIT-8 return in Poland the taxpayers must check all open items as of 31/12/2013 and adjust, if necessary, the tax-deductible costs in line with Article 15b CIT Act. Without doubt, following this principle is most difficult in accounting for direct costs, e.g. production costs.
Pursuant to Article 15b(8) CIT Act, if direct expenses are deducted in Poland before the term specified in paragraph 1 or 2, then the amount should be recognised as a tax-deductible cost subject to Article 15, but not earlier than it is paid. Pursuant to Article 15b(2), if the payment term is longer than 60 days, the tax-deductible costs should be reduced 90 days after the unpaid amount is recognised as a tax-deductible cost, unless it has been paid within this time.
If we interpret this provision literally, we have to assume that the legislators meant recognising a certain payment as a tax-deductible cost after 90 days from recognising it as a tax-deductible cost. Therefore, the wording of this provision seems internally contradictory.
If we consider that the date referred to in Article 15b(8) CIT Act is the 90th day after an amount is recognised as a tax-deductible cost, then:
- on the one hand, the provision would defer tax-deductibility of unpaid amounts until the time they are paid;
- on the other hand, the provision would assume that the expense has already been deducted as the term referred to in Article 15b(2) CIT Act is tightly related to the earlier recognition of the expense as a tax-deductible cost.
In our opinion, this contradiction gives a chance for avoiding adjustments of production costs with the payment term over 60 days. We would be glad to share with you more details about this idea and other methods of relaxing the obligations to adjust the expenses. We can also provide comprehensive tax advisory in Poland.