Companies helping Ukrainians will not recognise all expenses as costs
A company that helps Ukrainian citizens and incurs expenses on, inter alia, household appliances, groceries, daily necessities, toys and educational materials for children, medicines or provides such persons with cash will not recognise the amounts spent as deductible costs. Invoking corporate social responsibility (CSR) is not enough.
This is the conclusion of a tax interpretation dated 24 August 2022 (No. 0111-KDIB2-1.4010.162.2022.2.AR).
– The case is important because, following the outbreak of war in Ukraine, it was largely Polish entrepreneurs who took on the burden of helping our neighbours from the East coming to Poland in large numbers. Although the conflict in Ukraine has been going on for more than six months now, many companies have not stopped their support. It is therefore not surprising that now entrepreneurs, wanting to ascertain how to correctly account for the amounts spent, are applying for tax interpretations. Unfortunately, the conclusions from the first available responses from the tax authorities are not good for business – assesses Łukasz Kupryjańczyk, tax adviser, partner at Thedy & Partners.
The Director of the National Fiscal Information explained that the recognition of expenses for assistance to refugees from Ukraine as tax costs is possible on the basis of a specific provision, i.e. Article 38w introduced by the Act of 12 March 2022 on assistance to citizens of Ukraine in connection with the armed conflict on the territory of that country (Journal of Laws 2022, item 583, Article 76). In this provision, the legislator clearly defines which categories of expenses and for which organisations can be considered as deductible expenses. In this case, the expense does not have to meet the premise of Article 15(1) of the CIT Act. However, this preference does not cover expenses for the purchase of goods and performance of services provided directly to Ukrainian citizens. And in the case under review, this is precisely what the company was dealing with.
– The company pointed to corporate social responsibility as an argument for recognising the expenditure on support for Ukrainians. According to the Director of the KIS, this is not enough. In the opinion of the officials, there is no connection to income, the entrepreneur does not indicate the documentation of the expenses and the transfer of cash seems to be a questionable practice – notes Łukasz Kupryjańczyk.
At the same time, he adds that companies that have engaged in providing assistance to Ukrainian citizens should consider each case of such support individually from the point of view of the possibility of recognising them as costs and thus reducing the tax base. The option of recognising a given expense as a cost depends on many factors and sometimes one element will determine whether the incurred amount is a cost or not.