Sponsorships – popularity of new tax relief on the increase

How can you benefit?

This preferential tax scheme gives all business operators the right to make an additional deduction from their income tax (PIT and CIT) base; generally, taxpayers are allowed to deduct as much as 50% of their expenses for projects in the cited areas (sports, culture or science) and claim an additional income tax allowance of 50% of their expenses, to be deducted from the tax base. As a result, the total deduction available to companies for income tax purposes is 150% of their expenses.

Under Article 18e of the CIT Act taxpayers reporting revenues other than capital gains may reduce their tax base, established in line with Article 18 of the CIT Act, by the amount corresponding to 50% of tax deductible costs spent to finance sports, cultural, higher education and scientific projects within the meaning of the applicable laws.

Poland’s tax system, which offers tax reliefs and allowances, provides entrepreneurs with an incentive to seek and generate enhanced savings. The Corporate Income Tax (CIT) Act sets forth a comprehensive and consistent framework to use similar mechanisms (allowances), which makes it considerably easier for taxpayers to claim deductions. Importantly, taxpayers may claim each relief or allowance separately. 

How to claim sponsorships tax relief?

Cooperation with e.g. cultural institutions, sports clubs or universities and claiming sponsorships tax relief on that account may seem a bit problematic. For this reason, taxpayers should find out the detailed rules underlying this preferential regime, not only those laid down in the income tax acts but also the provisions and definitions set forth in other regulatory instruments, including the following:

• the Act on the Organisation and Conduct of Cultural Activities of 25 October 1991;
• the definition of sports clubs provided in Article 28(1) of the Sports Act of 25 June 2010, to finance the objectives set out in Article 28(2) of that act;
• the cultural institutions entered on the register kept under Article 14(3) of the Act on the Organisation and Conduct of Cultural Activities of 25 October 1991;
• scholarships referred to in Article 97 and Article 213 of the Act on Higher Education and Science of 20 July 2018 and Article 283 of the Act of 3 July 2018 Implementing the Act on Higher Education and Science;
• the rules governing the taxpayer-funded employee expenses referred to in Article 163(2) of the Act on Higher Education and Science of 20 July 2018, set out in the agreement between an educational institution and the person receiving education;
• dual studies referred to in Article 62 of the Act on Higher Education and Science of 20 July 2018, with a specified major.

Note:

Taxpayers seeking to claim sponsorships tax relief should find out whether a given institution involved in CSR projects is to be found in the applicable registers. Because of taxpayers’ concerns, the Ministry of Finance and the Ministry of Sports and Tourism have published explanatory tax memoranda on their websites to explain the details of the relief.

Sponsorships tax relief – eligibility conditions

Under the existing law, eligible expenses are those not returned to the taxpayer in any form. Taxpayers may claim the deduction in their tax return for the tax year in which the expenses were incurred/paid. Please remember that expenses should meet the statutory deductibility criteria to offset the costs of sports or cultural projects or those promoting higher education and science within the meaning of the applicable statutes.

At the same time, the law governing sponsorships tax relief excludes depreciation/amortisation charges of fixed tangible and intangible assets to the extent that they relate to their value that corresponds to the expenses incurred/paid to acquire or develop those fixed tangible or intangible assets, which were offset against the income tax base or returned to the taxpayer in some form.

A taxpayer making sponsorships tax relief deductions is required to report it using the specified form (PIT-CSR or CIT-CSR) with a list of their deductible expenses incurred/paid. This form should be filed within the deadline for filing the tax return in which sponsorships tax relief is claimed.