Corporate Income Tax Adjustment for 2018 – final opportunity to recover overpaid tax

Regulatory framework applicable in 2018

In 2018, Article 15e of the CIT Act introduced limitations on the deductibility of expenses incurred for services provided by related parties. These restrictions encompassed:

• advisory services,
• market research,
• advertising services,
• management and supervisory services,
• data processing services,
• insurance,
• guarantees and sureties,
• and other services of a similar nature.

The statutory cap comprised PLN 3 million plus 5% of tax EBITDA. Any excess amounts beyond this threshold were non-deductible in the year incurred. However, pursuant to Article 15e(9), undeducted costs could be carried forward and deducted in subsequent tax years, within the applicable limits for those years.

Legislative developments from 2022 onwards

Effective January 1, 2022, Article 15e of the CIT Act was repealed under the framework of the "Polish Deal." Despite this repeal, taxpayers retained the ability to deduct previously non-deducted expenses in subsequent tax years in accordance with the provisions of the repealed regulation, as specified in Article 60(1) of the amending act. This entitlement applies for up to five tax years, subject to the respective limits in force during those periods.

Potential for recovery of overpaid tax

Many taxpayers, acting out of an abundance of caution, may have excessively restricted the deductibility of intangible service expenses during the years 2018–2021. Current interpretations issued by tax authorities and rulings by administrative courts suggest that certain categories of these expenses could have been treated as fully deductible without restrictions.

This creates an opportunity to:

1. Submit amended tax returns for the years 2018–2021, accounting for previously non-deducted expenses;
2. File applications for a tax refund to recover any resulting overpayment.

Importance of prompt action

Following December 31, 2024, taxpayers will lose the ability to amend tax returns for 2018 or recover overpaid tax due to the expiration of the statute of limitations. Acting before this deadline enables taxpayers to:

• correct prior tax settlements,
• recover overpaid amounts, and
• avoiding the risk of tax authorities challenging the settlements in the future.

Recommended course of action

1. Expenditure analysis
   Conduct a comprehensive review of intangible service costs incurred during 2018–2021 to evaluate their deductibility in light of current jurisprudence and tax rulings.
2. Preparation of amended returns and applications
   Prepare and file amended tax returns and applications for a refund of overpaid tax.

Our expertise at your service

Our team of tax advisors offers end-to-end support in analyzing and preparing CIT adjustments and refund applications. Should you require assistance, please do not hesitate to reach out to us.