Contractual Penalties and Tax-Deductible Costs – Klaudia Motyka’s Publication in “Prawnik” Journal
Does every contractual penalty automatically disqualify the expense from being treated as tax-deductible? This question continues to raise doubts – both among taxpayers and tax advisors.
Although Polish tax law does not impose a blanket ban on recognizing contractual penalties as tax-deductible costs, the interpretative practices of tax authorities and the rulings of administrative courts often go in very different directions.
The latest issue of “Prawnik” journal (1/64/2025) features an article by Klaudia Motyka, titled:
“Contractual Penalties and Tax-Deductible Costs in Income Taxes.”
In the article, the author explores the circumstances under which a contractual penalty may – or may not – be classified as a tax-deductible cost. She presents key discrepancies between restrictive and broad interpretations and analyzes recent individual tax rulings and court decisions, including the Supreme Administrative Court judgment of 21 June 2023 (case no. II FSK 68/21).
This is essential reading for anyone who wants a full understanding of the risks and opportunities related to the tax treatment of such expenses.