It’s the net amount that decides. The Director of National Revenue Information changes its controversial approach.
The case involved a private tax ruling requested by a bank. The bank’s position was that may be entitled to proportional deduction of VAT charged on services supplied to it. In some cases the bank may not identify the right of deduction in relation to purchases of certain kinds of services. The bank assumed it would be subject to the deductibility cap on intangible services for income tax purposes under Article 15e of the CIT Act. In accordance with this law, which applies as of 2018, there are limits on the amounts that may be deducted for income tax purposes when purchasing certain services from associated enterprises. Any such expenses above PLN 3M may only be deducted to the extent they do not exceed 5% of the EBITDA ratio construed specifically for tax purposes. The bank wanted to know if the amount whose deduction is barred by Article 15e CIT Act is net or gross of VAT. The bank’s position was that it is the net amount while any input VAT that is not deductible for VAT purposes is deductible for income tax purposes under Article 16(1)(46) CIT Act.

For the full article by Michał Wodzicki, our tax advisor, see here.