Junior Tax Consultant at RSM Poland
Until 30 June 2020, medium and large enterprises could apply for subsidies to compensate for increasing energy prices. This assistance was granted to taxpayers upon request, and subsidies were handed out by the Price Difference Fund from the state budget. The entrepreneurs who have received subsidies are now in for a nasty surprise. Most likely, they will have to account for the assistance they were given.
Revenue or not?
The doubts concerning the received assistance result from the fact that taxpayers are not sure if this funding is revenue within the meaning of the tax regulations. The earlier practice of the tax authorities has shown that de minimis aid is not being considered taxable revenue.
Until recently, one could find two interpretations in the official database of tax interpretations as regards electricity price subsidies. One of them (ref. no 0114-KDIP2-1.4010.49.2020.1.MR) was issued by the Director of the National Revenue Administration Information Centre (KIS) on 14 April 2020 and was favourable from a taxpayer’s perspective. The KIS Director stated there that the received assistance does not constitute taxable revenue. This position was based on the provisions of Art. 12 par. 4 item 14 of the CIT Act, where it reads that the value of things or rights received free-of-charge or partially free-of-charge, as well as the value of other free-of-charge or partially free-of-charge financial benefits financed or co-financed from, among others, the state budget, shall not be revenue.
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Change of position
However, on 5 May 2020, the KIS Director issued another interpretation (ref. no. 0111-KDIB1-1.4010.25.2020.2.NL) on the same topic. This time, the tax authority decided that received cash shall be considered CIT-taxable revenue. The interpretation indicated that the received assistance cannot be considered things or rights received free-of-charge or partially free-of-charge nor any other free-of-charge or partially free-of-charge financial benefits. As a result, the received money shall be revenue for the taxpayer within the meaning of Art. 12 par. 1 item 1 of the CIT Act. In this interpretation, the KIS Director stated that such a position has its economic justification. The reason behind it is that the taxpayer, as a rule, has the right to include electricity invoices in his or her tax deductible costs when calculating the tax. Hence, it was not the aim of the legislator to grant any additional, tax-free funding.
Therefore, it turns out that funding aimed at compensating end-users for the surge in electricity prices most probably constitutes revenue for taxpayers. I am saying “most probably”, because until recently the KIS Director had certain doubts himself, and entrepreneurs could only rely on two contradictory interpretations issued over a short time. However, as the author of an article entitled Does the electricity price subsidy constitute revenue published in Rzeczpospolita on 5 June 2020 noted, at a certain point, both interpretations disappeared from the official database. When asked about this mysterious disappearance, the National Revenue Administration Information Centre responded that it was working on a consistent position.
At the moment, only one interpretation of 5 May 2020 has been republished, namely the one that disfavours taxpayers. Thus, it seems that the tax authorities have indeed come up with a clear position, while medium and large enterprises should include the subsidies they have received in their taxable revenue in order to avoid any disputes with the tax office. Let us hope that the next time the legislator creates state aid laws he does not forget to regulate the tax aspects.
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