Ruling description

In a judgment handed down on May 6, 2014 (case no. I SA/Gd 349/14), the Provincial Administrative Court (WSA) in Gdańsk held that the taxpayer’s obligation to reduce accordingly (adjust) its tax-deductible costs in connection with a failure to pay amounts due to the trading partner within the time limit prescribed in the tax regulations also applies in a situation where the trading partner is a foreign entity.

The case involved a Polish clothing company acquiring some goods from foreign taxpayers, including those based outside the EU (particularly Asian suppliers). In this regard, the company was entitled to extended payment deadlines which clearly exceed 60 days. Under the regulations in force since January 1, 2013, if the deadline for payment exceeds 60 days and the taxpayer does not pay the amount due within 90 days from the date on which it was claimed as a tax-deductible cost, the taxpayer is required to adjust that tax-deductible cost accordingly upon the expiry of that time limit. However, the company reasoned that, given the functional inter- pretation of the applicable regulations, the obligation to adjust its tax-deductible costs did not apply in respect of its foreign trading partners, in that the main purpose of the applicable regulation was to avoid payment backlogs in domestic business dealings and protect Polish creditors.

The tax authorities rejected the taxpayer’s view, arguing that the applicable tax regulations are clear (as they introduce no differentiation based on the registered office of the taxpayer’s trading partner) and, as such, they require no further interpretation.

Nevertheless, addressing the taxpayer’s comments relating to the purpose of the regulations under discussion, the tax authorities also noted that, if waived, the obligation to adjust tax-deductible costs relating to taxpayers’ debt toward their foreign trading partners would favor such taxpayers over taxpayers who primarily deal with domestic partners.

The WSA in Gdańsk also rejected the view suggested by the taxpayer. In the justification, the court stressed the plain language of the tax regulations governing adjustment of tax-deductible costs. In this regard,  the court decided that, as the language of the reg- ulations was clear and in no way warranted taking a different approach toward the taxpayer’s situation based on the creditor’s registered office, such a different approach could not be lawfully taken based solely on the underlying purpose of the regulation under consideration.


It could be assumed that the view presented by the WSA in Gdańsk will prevail in case law or, better still, in fiscal practice. It seems that the application of the provisions governing adjustment of tax-deductible costs in the case of debt toward foreign trading partners does not quite serve their purpose, which was to improve the situation of creditors, not to impose additional sanctions upon debtors. Nevertheless, the view endorsed by the court is justified by the literal wording of those regulations. On top of that, a waiver of the regulations governing adjustment of tax-deductible costs in the event of debt toward EU (EEA) partners might be impermissible under EU law. For that reason, taxpayers who, in their relations to defer payment without having to adjust their tax- deductible costs. Recent case law indicates that, despite the tax authorities voicing their doubts, those solutions could be introduced with the fiscal risk reduced to thewith foreign suppliers, worked out particularly favorable terms of delivery due to their market position, high volume of orders, commercial integrity or successful negotiations, should consider applying the alternative financial solutions we have recently outlined in order a minimum.