Optimize your business costs thanks to expansion relief
Relief for expansion
Expansion relief consists in the possibility of additional deduction from the tax base of costs incurred in order to expand the sales markets by the taxpayer.
Who is entitled to expansion relief?
The relief gives taxpayers the opportunity to additionally deduct the value of expenses that are related to increasing revenues from the sale of products.
Products are things manufactured by the taxpayer – i.e., in accordance with the regulations, tangible and capable of independently appearing in trade. So it’s about material things. The relief does not cover rights, e.g. copyright. Therefore, the recipient of the relief are producers of products distributed in Poland.
What does it involve?
Expansion relief consists in the possibility of additional deduction from the tax base of costs incurred in order to expand sales markets by the taxpayer – both domestic and foreign. (However, in order to recognize the relief from the sale of products to foreign markets, it is important that the sales income is taxed in Poland).
The essence of the relief is that expansion expenses are deductible twice – once as a tax-deductible cost and again as part of the relief.
The relief has an amount limit. In a given tax year, the taxpayer is entitled to deduct a maximum of PLN 1 million.
The regulations clearly indicate the categories of costs to be recognized under the relief, including:
participation in fairs (organizing the exhibition space, purchasing plane tickets for you and your employees, accommodation and meals for you and your employees),
promotional and information activities (including purchase of advertising space, preparation of a website, press publications, brochures, information catalogs and leaflets regarding products),
adapting product packaging to the requirements of contractors,
preparation of documentation enabling the sale of products, in particular regarding the certification of goods and registration of trademarks,
preparation of documentation necessary to participate in the tender, as well as to submit offers to other entities.
The tax authorities emphasize that the list of expenses is closed. At the same time, they indicate an exemplary calculation of costs related to promotional and information activities. Such costs will include, for example, the services of influencers and actions taken by the taxpayer on social networking sites (FB, Instagram).
Method of settling expansion relief
The relief is settled in the annual return for the year in which the costs were incurred. If a loss is reported in a given year, the taxpayer may benefit from the relief in the tax return for the next 6 tax years immediately following the year in which he was entitled to the deduction.
Taxpayers incurring expenses that are included in the catalog of eligible expenses for expansion relief should assign them to manufactured products and keep records in this regard. This is important when introducing several products to the market at the same time.
Taxpayers are also obliged to check their income on an ongoing basis to ensure that the conditions for benefiting from the relief are met. The relief can be settled on an ongoing basis, and the increase in revenues should be reported for two consecutive years (from the year of incurring eligible costs).
The tax authorities explain that the taxpayer is not obliged to prove that the costs covered by the relief contributed to the increase in sales revenues. It does not have to be an increase in sales of products for which the costs covered by the relief were incurred. It’s about numerical growth.
In the light of the above, it is worth analyzing the incurred expenses in terms of taking advantage of the expansion relief..
- verification of the business activity and expenses incurred in terms of the possibility of applying expansion relief;
- analysis of the qualification of specific expenses for relief and the development of contracts/documents allowing the expenses to be covered by relief;
- preparation of guidelines for keeping records of expenses and settling costs covered by relief in the tax return;
- clarifying any doubts that may arise when taking advantage of the relief, including submitting applications to the Director of the National Tax Chamber for the issuance of interpretations of individual tax law provisions.