Won case before NSA on the principle of determining company’s tax deductible costs | CASE STUDY

On 16 February 2022, the Supreme Administrative Court (NSA) issued a precedent judgment regarding the principles of determining the tax deductible cost in the event of sale of assets contributed in kind (reference number II FSK 1427/19). The case brought down to answering the question on to what amount a company was entitled to recognize the tax deductible cost in relation to the sale of an asset that was acquired as an in-kind contribution made after 1 January 2017, if the value of the subject of the contribution only partially increased the share capital, while in the remaining amount was allocated to the reserve capital (agio).

In the opinion of the Director of the National Tax Information and the Voivodship Administrative Court, the nominal value of company's shares issued in return for the contribution is the tax deductible cost in such circumstances. The Supreme Administrative Court completely rejected this viewpoint in the above-mentioned judgment. Changes in the principles of taxation of in-kind contributions, effective from 1 January  2017 (departure from determining the revenue of the contributing entity, from the nominal value of shares acquired to replace it with the market value of the contribution) also have an implication on the cost side of the company that receives the contribution. If the contributing entity is obliged to recognize the revenue at the market value of the object of contribution, then the company that receives the contribution is entitled to recognize the tax deductible cost in the same amount, less  depreciation write-offs, if applicable.

From the side of GWW, the case was handled by Kamil Szczęsny, Jacek Olczyk and Mariusz Tkaczyk, GWW partner and supervisor of the tax planning and income tax practices.