CIT according to the New Polish Deal

Amendments effective as of 1 January 2022

Under “New Polish Deal” as of 1 January 2022 following an amendment to the CIT Act, surplus debt funding costs up to 30 percent of EBITDA generated in a given fiscal year or to PLN 3 million (the “safe harbor” cap) classify as tax-deductible expenses.

Under the amended Act, though, these limits cannot be combined.

Regulations applicable before 2022 (from FY18)

Prior to the effective date of the above amendments, respective provisions of the Act raised a number of doubts.

In particular:
1. Tax authorities adopted an unfavorable approach, interpreting the limit as 30 percent of „taxable EBITDA” or PLN 3 million, whichever higher (the approach remains applicable to prior periods);
2. Administrative courts (including the recent judgments of the Supreme Administrative Court) adopted an alternative approach (which remains applicable to prior periods), under which debt funding costs are tax-deductible up to the amount of PLN 3 million plus 30 percent of „taxable EBITDA”.

Practical implications

From the business perspective:
1. 1. In relation to FY 2018-2021 entities may consider filing motions for tax refund, but the process may be challenging and necessitates a thorough analysis of potential savings.
2. 2. In relation to FY 2022 taxpayers are recommended to carefully monitor the limit in the context of the recent amendments.