New rules for identifying interest on borrowings, loans since year 2018

The change of rules for identifying interest on borrowings, loans – new wording of art 15c of the Corporate Income Tax Act. Tax costs will not include interest on borrowings, loans, the interest part of leasing instalments, interest on late payment of liabilities, to the extent that the surplus of debt financing costs exceeds the applicable limit, i.e. PLN 3 000 000 during a year.

Surplus of debt financing costs – an amount of the debt financing costs incurred by a taxpayer, which are included in the cost of revenues in a fiscal year, that is a surplus over taxable interest revenues obtained by the taxpayer in such tax year.

Debt financing costs – any costs connected with obtaining funds from other entities, including unrelated entities, and using such funds; this includes particular interest, including fixed assets or intangible assets, capitalised or recognised at historical cost, charges, commissions, bonuses, interest part of leasing instalment, fines and charges for late payment of liabilities, as well as costs of securing liabilities, including the costs of derivative financial instruments, regardless of whose benefit they have been incurred for;

Interest revenues – revenues on interest, including capitalised interest, and other revenues that are economically equivalent to interest, corresponding to debt financing costs.

Value exceeding 30% of the surplus amount of the total revenues from all revenue sources, decreased by interest revenues, over the total costs of revenues decreased by the value of depreciation and amortisation allowances on fixed assets and intangible assets, included in the tax costs in a fiscal year, as well as debt financing costs that have not been included in the historical cost of fixed assets or intangible assets, will be excluded from tax costs.

The current regulations on thin capitalisation listed in art 16 (1) (60) and (61) apply to interest paid until the end of 2018.