Łukasz Szczygieł

Tax adviser (Poland)
Senior Associate
Phone: +48 12 378 66 32

On 19 July 2018, the statutory catalogue of activities and persons entitled to apply the preferential rate of tax-deductible costs in the personal income tax was extended by way of a law amendment. According to the justification of the amending statute (Parliament paper 2291), the new amendment to Article 22(9b) of the PIT Act extends the catalogue of situations in which it is possible to apply the increased 50% rate of tax-deductible costs. So the changes are favourable to taxpayers, as compared with the legal status effective from 1 January 2018. The changes were made in response to numerous doubts among the representatives of artistic professions who were not able in practice to clearly tell whether they were entitled to tax relief in the form of increased tax-deductible costs or not.

Who is eligible?

A taxpayer may apply increased tax-deductible costs for revenues from sources listed in the Personal Income Tax Act (as per Article 22(9)(3) PIT Act). According to the provisions in force from 1 January 2018, those sources were explicitly listed in the act and included revenues generated from, among others, the use or disposal of copyrights and derived rights by artists. As compared with the legal status in force until 31 December 2017, the amended act explicitly indicates which areas of artistic activity are eligible for 50% rate of tax-deductible costs (Article 22(9b) PIT Act). The catalogue covers the following activities:

  • architecture, interior architecture, landscape architecture, city planning, literature, arts, music, photography, audio-visual work, computer programs, choreography, artistic violin-making, folk art and journalism;
  • research and development as well as scientific-educational activities;
  • artistic activity in the field of acting and stage arts, theatre and stage directing, dance and circus arts as well as in the field of conducting, vocal and instrumental studies, costume design and stage design;
  • audiovisual production of directors, screenwriters, image and sound operators, editors, stuntmen and
  • journalistic activity.

Additional areas

The catalogue updated on 19 July 2018 was published, as previously, in Article 22(9b) PIT Act and additionally covers such areas as construction engineering, translation or computer games, among other things. Furthermore, the provisions have been clarified by indicating that the new regulations also include scientific and teaching activities carried out at universities. In the opinion of lawmakers, the amended provisions clarify and organise the old regulations. In order to improve the taxpayer's situation in the accounting period corresponding to a fiscal year, it was possible to give the new regulations retroactive effect from 1 January 2018.

New interpretation of provisions

The amendment should be assessed positively. However, it needs to be emphasized at the same time that its application seems to be more important than the wording of the act itself. Please note that regardless of the changes in the wording of the regulations, taxpayers are disadvantaged by the prevailing interpretative approach of the tax authorities, which in practice deprives large groups of taxpayers of the tax relief in question. The inspiration for changing the interpretation approach by tax authorities could come from numerous rulings of administrative courts, which emphasized that preferential increased rate of tax-deductible costs could not be applied only in the case of creative work, but also in connection with obtaining specific results and using copyrights by entitled persons. The above opinion was later underpinned by private advance tax rulings issued already at the turn of 2017, according to which things like records of created works and determining the amount of remuneration in the employment contract (contract of mandate, contract for specific work) payable for the transfer of the right to dispose of the works by an author for the benefit of the employer or principal were essential to apply the preferential rate of tax-deductible costs. Nevertheless, the implementation of such solutions may prove difficult or even impossible in practice, because in a number of cases the moment of work creation and the number of created works cannot be precisely defined. What is worse, in some of its rulings the tax authorities clearly expect a remuneration to be determined separately for each activity and to correspond to the arm's length value of the created work.

We can only hope that the new, taxpayer-friendly regulations will encourage the tax authorities to change their approach to the interpretation of provisions on increased tax-deductible costs. If you would like to know more on this topic, have any questions or doubts, please contact our experts who are available in Rödl & Partner offices in Cracow, Gdansk, Gliwice, Poznan, Warsaw or Wroclaw.