Intangible services - limitation of tax costs

In regard to the approaching CIT settlement period and numerous doubts arising from the interpretation of regulations on exclusion of expenses incurred for purchase of intangible services and licenses from related parties from tax deductible costs, we recommend to provide a revision of transactions with related parties in order to verify the correct application of the above regulations and identify potential tax risks.

In reviewing related party transactions, we recommend performing the following:

  1. analysis of the transactions in terms of being subject to the limitation on inclusion in deductible costs under Article 15e of the CIT Act;
  2. verification of the correctness of the calculation of the limit of expenditures on intangible services and licenses that may be classified as costs;
  3. analysis of the expenses for services, fees and charges not subject to the limitation due to their recognition as tax deductible costs - directly related to the production or acquisition of goods or provision of services (Article 15e Section 11 of the CIT Act);
  4. analysis of the correctness of application of the limitation on deductible expenses by taxpayers conducting simultaneously their activities in special economic zones and their activities outside such zones.

We know from experience that the above problems mainly concern entities incurring expenses on purchase of advisory services, market research, advertising services, management and control, data processing, insurance, guarantees and sureties and services of similar nature, as well as licenses, from related entities in the amount exceeding PLN 3 million in the tax year.