CIT series: donations

March 27, 2023

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During the preparation of the annual CIT calculation, taxpayers wonder whether they can reduce their tax liability by donations. Costs incurred for various types of support provided during the tax year are also questionable.

When can donations be tax deductible?

In accordance with the general rule applicable under CIT, donations cannot be classified as tax deductible costs – this results directly from art. 16 sec. 1 point 14 of the CIT Act. Exceptions are provided only for the support provided to the Polish Tourism Organization and the costs of purchasing food products donated to a public benefit organization. However, it is worth remembering that the CIT Act provides for the possibility of reducing the tax base by donations made to public benefit organizations for the implementation of their socially useful goals. This deduction is limited to 10% of the income earned by the taxpayer for a given tax year.

The purpose of donation is important

In the context of a favorable tax settlement of donations, the purpose for which we provide support is important. It must be a socially useful activity (as defined in Article 4 of the Act of 24 April 2004 on public benefit and volunteer work). It is best to confirm the fulfillment of this condition by signing a contract with a given organization or by submitting a declaration of appropriate content by such entity.

Important! Both in-kind and cash donations are deductible. In the case of in-kind donations, remember to correctly determine their value.

Deduction of costs incurred to fight COVID-19

It is worth mentioning that for 2022 taxpayers have the right to deduct costs incurred to fight COVID-19. The tax settlement for 2022 will most likely be the last in which taxpayers will be able to take advantage of this deduction – in accordance with the provisions of the CIT Act, it is possible to deduct expenses incurred to support the fight against the COVID-19 pandemic, which were incurred until the end of the month in which the state of epidemic was canceled – we would like to remind you that the state of epidemic was lifted in Poland on May 16, 2022

Deduction of costs of donations made to medical and educational institutions

Pursuant to the CIT Act, deductions from the tax base include, among others: donations made to entities performing medical activities or educational institutions. It applies if the subject of the donation were laptops or tablets.

Deduction of costs of donations made to counteracting the effects of hostilities

In connection with the war in Ukraine, the CIT Act also regulates issues related to donations made in the period from February 24, 2022 to December 31, 2022 for purposes related to counteracting the effects of hostilities. According to Art. 38w of the CIT Act, taxpayers may include in tax deductible costs expenses incurred for the purchase of goods, which were then donated to the above-mentioned purpose. Importantly, only donations made to public benefit organizations, local government units, voivodes or entities performing medical activities in Poland or Ukraine can be included in the tax deductible costs. Therefore, any donations made directly to Ukrainian citizens cannot be deducted.

Important! Only those expenses that have not previously been classified as tax deductible costs under other regulations can be settled under the indicated regulation. This means that the aid cannot be included in tax costs twice.

Important! In the settlement for the tax year 2022, 100% of the value of the donation is deductible.

More posts from the “CIT series” that will help you prepare for the corporate income tax settlement:

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