Source prawo.pl
Unofficial translation
The subsidy received as part of the financial shield, intended for the financing of current business activities, does not affect the price of services or goods sold by the taxpayer. Therefore, it is not subject to tax on goods and services.
The company doubted whether it should include the financial subsidy received under the financial shield in the tax base. It conducts business activity in the area of renting commercial premises to business entities and natural persons. He is an active VAT payer.
The company concluded an agreement under which it received a subsidy in the amount of PLN 216,000.00 from a joint-stock company to a bank account in May 2020. The subsidy was granted under the so-called Financial Shield of the Polish Development Fund for Small and Medium Enterprises. The company intends to allocate the amount of the subsidy to finance current business activities, i.e. for the payment of interest on loans, employee salaries, maintenance costs of rented real estate, etc. The contract concluded with the joint-stock company shows that in the future the company will be obliged to repay the subsidy in 24 equal installments, starting from the 13th month from the month of receiving the subsidy, and may turn to a joint-stock company for the redemption of part of the subsidy received.
Most of the services sold by the company are subject to a tax rate of 23%. In a small range of services, sales are at a rate of 8%. The company applied for an interpretation as to whether the subsidy from a joint-stock company obtained in May 2020 is required to be considered as the taxable amount for value added tax, on which VAT due should be calculated and declared at a rate of 2 percent.
Price-influencing subsidies are subject to VAT
According to the inquiring taxpayer, in principle pursuant to Art. 29a paragraph. 1 of the act on tax on goods and services, subsidies or subsidies obtained by the taxpayer that affect the price of the service or goods sold constitute the basis for taxation with the tax on goods and services. However, we are dealing here with a special situation, because the obtained subsidy actually affects the selling prices of services provided by the company, as they will be periodically financed from it under the so-called anti-crisis shield expenses related to expenses related to the scope of business activity conducted by the party. However, a joint-stock company may claim all or part of the subsidy to be reimbursed, which means that in fact it is only a form of aid in financing its activities, and not help in obtaining better financial results (higher prices).
Therefore, in the opinion of the company, the subsidy obtained in May 2020 is not required to recognize the taxable amount with value added tax, on which the due tax on goods and services should be calculated and declared.
The criterion for recognizing a subsidy as taxable
The director of the National Revenue Information stated that the taxpayer’s position was correct. It concluded that in order to determine whether or not given subsidies (subsidies and other subsidies of a similar nature) are taxed, the specific conditions of their awarding, defining the objectives of the subsidy implemented in a specific form, are important.
The criterion for recognizing a subsidy as taxable is therefore the finding that the subsidy is made for the purpose of financing a specific activity subject to VAT. On the other hand, subsidies that cannot be linked to specific activities subject to tax on goods and services, do not constitute the taxable amount within the meaning of Art. 29a paragraph. 1 of the VAT Act.
Subsidies, subsidies and other payments of a similar nature are included in the taxable amount for goods and services tax only if it is a subsidy, subsidy or other payment of a similar nature directly related to the supply of goods or provision of a service. The tax base includes only such subsidies, subsidies and other payments of a similar nature that are directly allocated to co-financing a specific good or a specific type of service. On the other hand, if the taxpayer receives a subsidy related to the supply or provision of services, as part of the price of a specific service or as compensation for the performance of a specific service at reduced prices, such payment will be included in the taxable amount for value added tax.
The KIS director emphasized that the tax base for value added tax is increased only by such subsidies that are absolutely and directly related to a given supply of goods or services. However, if there is no such direct relationship, the general subsidy – to cover operating costs, does not increase the tax base, and thus is not subject to taxation.
The director of KIS recalled that subsidy taxation is an exception to the general rules of the common VAT system. Not all subsidies are part of the VAT tax base. Only those that are subsidies directly related to the price of the supply of goods or the price of the provision of services.
Subsidy under the shield excluding VAT
The director of KIS stated that in the case in question, in connection with the financial subsidy received by the taxpayer under the Financial Shield of the Polish Development Fund for Small and Medium-sized Enterprises, there will be no specific benefits in exchange for specific remuneration. The company intends to allocate the amount of the subsidy to financing current business activities, including for the payment of interest on loans, employee salaries, maintenance costs of rented properties.
Thus, due to the fact that the financial subsidy will be allocated to the financing of the taxpayer’s current economic activity, it does not affect the price of the services provided or the goods sold and it does not constitute the tax base within the meaning of Art. 29a paragraph. 1 of the VAT Act. As a consequence, the subsidy in question is not subject to tax on goods and services.
Interpretation of the director of the National Tax Information of 27 August 2020 No. 0113-KDIPT1-1.4012.396.2020.4.AK
