Expert's Views

LIMIT TO 50% TAX DEDUCTIBLE COSTS FOR AUTHORS

Artists, scientists, journalists, but also trainers and other professions falling under the label “author” could take advantage of a very preferential 50% tax deductible costs. This privilege was significantly limited as of 2013.

Also when calculating tax liabilities of artists and other creative professions for 2014, we must remember that not more than 42 764 PLN can be deducted as costs. This means, that in relation to income exceeding 85 528 PLN no costs are applicable.

SUPERVISORY BOARD MEMBERS’ CONTRIBUTIONS

Since the beginning of 2015 remuneration received by members of supervisory boards is subject to social security contributions. Deductions for rental and retirement insurance have to be made even in case the supervisory board member is also employed and makes such contributions in relation to his employment income. Polish security system will soon reach deeper to pockets of a next group – as off 2016 calculation of contributions of freelancers working based on several contracts will change.

Short term (daily) rental

One of the local Administrative Courts has issued a judgment concerning taxation of income from short term rental. The court stated that short term (daily) rental cannot be treated as a so called private renting and taxed with a 8,5% flat rate. Such activity fulfils the definition of a business activity, since it requires organized, continued and professional operations and is aimed at profit. Therefore, income from short term rental can only be taxed in accordance with methods provided for business activity.

Private medical insurance offered by the employer

The High Administrative Court has passed a resolution concerning taxation of medical insurance bought by employers for their staff as a benefit in kind. The issue has always been controversial. However, the most common approach was that if the actual individual value of the benefit in kind is not possible to determine, no taxable income arises for the employee.

Costs’ division in a partnership

Each of the partners in a partnership (entity considered as transparent for income tax purposes) should calculate the costs in a proportion corresponding to their share in the partnership’s profit. Implementing – in the partnership agreement – a regulation contradictory to this provision shall not have effect on the grounds of tax law.

Taxable costs of capital increase

Which, if any, expenditure related to the increase of share capital of a company constitutes its taxable costs has always been controversial. The High Administrative Court has issued a resolution with this regard. Expenditure directly related and essential for increase of capital, such as notarial and court fees, do not constitute taxable costs and do not decrease the taxable income.

Management board member without remuneration

It is quite common for capital groups to nominate a member of the board of the dominating company to hold such function also in an associated company. Usually in such cases position in an associated company is not additionally remunerated, or remuneration is paid by the dominating company.

The Polish tax authorities and the judiciary are unanimous that this generates a taxable income in form of a benefit in kind for the associated company. The value of the benefit in kind should be determined based on the market value of services of a management board member.

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