- Moment of recognition of a write-off for the Price Difference Payment Fund in tax deductible costs
- Possibility to include expenses for damage caused in connection with RES construction works in the tax deductible costs
- Settlement of CIT on the sale of electricity from RES under the auction system
- Photovoltaic farms on agricultural land – increased taxation
- Obligation to record in a fiscal cash register sales of electricity at vehicle charging stations
1. Moment of recognition of a write-off for the Price Difference Payment Fund in tax deductible costs
Write-offs transferred to the Price Difference Payment Fund should be recognised as deductible costs on the date they are incurred – the Director of the National Fiscal Information ruled in the tax ruling of 6 October 2023 (case no: 0111-KDIB2-1.4010.342.2023.1.MK).
A company, which is a producer of electricity from RES, in connection with its obligation to make write-offs to the Price Difference Payment Fund (hereinafter: „the Fund”), submitted a question to the Director of the National Fiscal Information (hereinafter: „the KIS”) whether such write-offs can be recognised as deductible costs in the same month in which it recognises tax revenue from the sale of electricity.
According to the company, the write-offs to the Fund are linked to the amount of electricity sold in a given period, which means that sales must have been performed beforehand in order to calculate the amount of the write-off. Therefore, it must be concluded that the write-offs to the Fund do not determine revenue and, consequently, will not be included in direct costs. Thus, pursuant to Article 15(4d) of the Corporate Income Tax Act (hereinafter: „the CIT Act”, Journal of Laws 2022, item 2587, as amended), indirect costs are deductible on the date they are incurred, i.e. on the date they are recognised in the accounting books.
The director of the KIS agreed with this view.
2. Possibility to include expenses for damage caused in connection with RES construction works in the tax deductible costs
Expenses incurred to cover damage caused in connection with the construction of wind farms may be recognised as tax deductible costs in accordance with the position of the Director of the KIS expressed in the tax ruling of 9 October 2023 (case no: 0111-KDWB.4010.92.2023.1.HK).
A company, in its application for a tax ruling, indicated that it operates in the construction industry and executes contracts for the construction of infrastructure related to the use of renewable energy sources.
A common occurrence during the construction of a wind farm is damage to the land on which the farm is built, but also to neighbouring land (including crop damage). On this basis, the landowner can claim damages under the provisions of the Civil Code.
Therefore, the company asked whether Article 16(1)(22) of the CIT Act (exclusion of contractual penalties and damages for defectively performed services from tax deductible costs) would apply to the expenditures to cover damages incurred in connection with the construction of the wind farm and, consequently, whether the expenditures in this respect could not be recognised as tax deductible costs.
The company took the view that such expenditures do not fall under the aforementioned exclusion, as the services provided by the company are not defective in any way, and the company is not obliged to pay any contractual penalties or damages for improperly provided services to the investor. This is because the damage does not arise for the principal (which is what the aforementioned provision refers to), but for the owner of the land – a third party in relation to the concluded contract for the construction of the wind farm. In the company’s opinion, with which the Director of the KIS agreed, expenses intended to cover the described damage can therefore be recognised as tax deductible costs.
3. Settlement of CIT on the sale of electricity from RES under the auction system
Doubts regarding the moment of recognising revenue and costs in connection with participation in the auction support system have been dispelled by the Director of the KIS, in which it indicated that revenue from the receipt of funds to cover the negative balance arises upon receipt, while costs from the return of the positive balance should be recognised on the date they are incurred.
Accounting for revenues and costs from the sale of electricity under the auction system is challenging for energy producers. The issue that raises the most doubts is the moment of revenue and cost recognition, resulting in numerous queries to the Director of the KIS.
Under the auction support system, the winner of the auction sells electricity from RES for the market price and can therefore either apply to Zarządca Rozliczeń S.A. (hereinafter: „Settlement Administrator”) to cover the negative balance, i.e. to compensate for the price accepted under the won auction (when the market price is lower at a given moment), or he may be obliged to return the so-called positive balance (when the market price is higher).
In the tax ruling of 1 March 2023 (case no: 0114-KDIP2-2.4010.262.2022.3.ASK), the Director of the KIS stated that in the case of receipt of an amount from the Settlement Administrator to cover a negative balance, the company should recognise income on this account at the time of receipt of the payment. This is because said amount does not constitute the sale price of goods or remuneration for the provision of services and no consideration on the part of the company occurs in connection with its receipt.
On the other hand, with regard to the return of the positive balance to the Settlement Administrator, it should be pointed out that this amount constitutes an indirect tax cost, as the expenditure on this account cannot be attributed to specific revenues. Therefore, the amount of the return of the positive balance should be recognised as a deductible expense on the date it is incurred, i.e. booked.
4. Photovoltaic farms on agricultural land – increased taxation
Real estate tax should, in principle, be levied on agricultural land on which a photovoltaic farm is located. This was stated by the Deputy Minister of Finance in his response to the parliamentary interpellation no. 42802, issued on 2 August 2023. In practice, this means higher taxation.
The parliamentary question concerned the classification and taxation of agricultural land on which large-scale photovoltaic farms are located. The Deputy Minister of Finance pointed out that, under current legislation, land classified as agricultural land is subject to agricultural taxation, with the exception of land occupied for non-agricultural business activities. However, agricultural land and forests occupied for business activities are subject to real estate tax.
The Deputy Minister emphasised that, as a rule, agricultural land occupied for photovoltaic farms is subject to real estate tax (and not agricultural tax), and the conduct of limited agricultural activity on such property does not affect the conclusion that it has been occupied for the purpose of conducting economic activity, if such land is necessary for the proper functioning of the wind farm.
At the same time, the Deputy Minister pointed out that in a situation where the agricultural real estate is only partly used for economic activities, real estate tax is due only on that part. Thus, it is possible that an agricultural property will be subject to agricultural tax on the part not used for economic activity and real estate tax on the part used for economic activity.
Taxing land for wind farms with real estate tax means, in practice, significantly higher taxation.
5. Obligation to record in a fiscal cash register sales of electricity at vehicle charging stations
Sale of electricity to natural persons not engaged in business activity, classified under PKWiU symbol 35, is subject to an exemption from the obligation to record it using a cash register, according to the tax ruling by the Director of the KIS dated 6 July 2023 (sign: 0112-KDIL3.4012.319.2023.1.EW).
According to the future event described in the application for a tax ruling, the company plans to open a charging station for electric cars, where it would provide services under PKWiU code 35.14.10.0 (services related to trade in electricity) and therefore wonders whether it will be able to benefit from the exemption from the obligation to record sales to natural persons not conducting business activity on a fiscal cash register.
As a rule, pursuant to the Act of 11 March 2004 on Value Added Tax (Journal of Laws 2023.1570, as amended), sales to natural persons must be recorded using cash registers. At the same time, on the basis of the Regulation of the Minister of Finance of 22 December 2021 on exemptions from the obligation to keep records of sales using cash registers (hereinafter: „the Regulation”), it is possible to apply exemptions with regard to this obligation until 31 December 2023 to the extent indicated in the annex to that Regulation. Pursuant to this annex, activities under PKWiU symbol 35 are exempt from the obligation to record sales using cash registers (including the described electric car charging service).
In addition, it can be pointed out that services under PKWiU code 35 will also be exempt next year from the obligation to keep records of sales using a cash register under the new regulation coming into force on 1 January 2024 (Regulation of the Minister of Finance of 24 November 2023 on exemptions from the obligation to keep records of sales using cash registers), so despite the change in the legal status, the indicated tax ruling will remain valid.