50% business tax costs
Natural persons earning income from copyrights can take advantage of privileged tax costs, which amount to as much as 50% of the amount of the income. Nothing prevents authors from carrying out their work as part of their business activities. The question therefore arises whether a 50% cost can be taken into account in this form as well. These issues will be the subject of this analysis.
Creator and 50% tax deductible
In the case of natural persons obtaining income from the property rights referred to in Art. 10 sec. 1 point 7 of the PIT Act, it is possible to apply increased 50% tax deductible costs.
Let us point out that pursuant to Art.18 of the PIT Act, income from property rights is considered, in particular, income from copyrights and related rights within the meaning of separate regulations, rights to inventive designs, rights to topography of integrated circuits, trademarks and decorative designs, including the sale of these rights against payment.
Revenues from the use of copyright by authors or the disposal of these rights occur when two conditions are met. First, it is necessary for the subject of economic rights to appear in the form of a work. Secondly, the generated revenue must be directly related to the use of certain copyright or related rights or their disposal, be the result of such use or regulation in the form of appropriate copyright or executive remuneration.
However, the issue of interest to us is described in Art. 22 sec. 9 points 1-3 of the PIT Act, where it was indicated that the 50% costs are determined for:
the creator's payment for the transfer of ownership of the invention, topography of an integrated circuit, utility model, industrial design, trademark or decorative design;
the license fee for the transfer of the right to use the above-mentioned tracks;
the use by authors of copyright and performers of related rights, within the meaning of separate provisions, or the disposal of these rights by them.
As you can see, 50% of the costs are strictly related to the exploitation of the authors' copyright to a given work.
Additionally, note that the PIT Act specifies a specific catalog of revenues entitling to 50% costs. Well, according to Art. 22 sec. 9b of the PIT Act, these costs apply to revenues obtained from:
creative activity in the field of architecture, interior design, landscape architecture, construction engineering, town planning, literature, fine arts, industrial design, music, photography, audio and audiovisual creativity, computer programs, computer games, theater, costume design, scenography, direction, choreography, artistic violin making, folk art and journalism;
artistic activity in the field of acting, stage, dance and circus art as well as in the field of conducting, vocal and instrumental studies;
audio and audiovisual production;
museum activities in the field of exhibition, science, popularization, education and publishing;
the dependent right referred to in Art. 2 clause 2 of the Act of February 4, 1994 on copyright and related rights, to develop someone else's work in the form of a translation;
research and development, scientific, scientific and didactic, research, research and teaching activities as well as didactic activities at the university.
As a side note, let us point out that the total tax deductible costs may not exceed PLN 85,528 in a given tax year, unless the taxpayer is able to prove that they were higher. In this case, the costs of obtaining are assumed in the amount of actually incurred expenses (Article 22 (9a) and (10) of the PIT Act).
A specific group of authors who obtain revenues from the exploitation of copyright works owned by them are entitled to 50% tax deductible costs.
Copyrights as part of a business
In addition to revenues from copyrights, the PIT Act allows for the possibility of obtaining revenues from non-agricultural economic activity (Article 10 (1) (3) of the Act).
At this point, let us point out that, in principle, the provisions do not exclude the possibility for authors to obtain revenues from proprietary copyrights, including for the sale of these rights for consideration, as part of their economic activity. For if these revenues are achieved in conditions indicating the activity of the taxpayer in an organized, continuous and profit-making manner, the basic conditions for economic activity specified in Art. 5a point 6 of the PIT Act.
Therefore, since the creator can generate income as part of economic activity, such a situation raises the question of the possibility of using 50% tax deductible costs in this respect.
In response, reference should be made to Art. 22 sec. 12 of the PIT Act, which states that the revenues referred to in Art. 14, the deductible costs referred to in paragraph 1. 9.
Pursuant to Art. 14 sec. 1 of the Act, the income from business activity is the amounts due, even if they were not actually received, after excluding the value of the returned goods, granted discounts and discounts. In the case of taxpayers selling goods and services subject to tax on goods and services, the revenue from this sale is deemed to be revenue less the tax on goods and services due.
Therefore, in the light of the above regulation, the possibility of accounting for 50% tax deductible costs does not apply to all sources of income.
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Definitely, the possibility of using the estimating norm was excluded in the case of the source of income, which is non-agricultural economic activity. The 50% costs are therefore only applied to revenues obtained from property rights, which are a source of revenues separate from economic activity.
Obviously, the above does not mean that a self-employed creator cannot take into account any costs in managing copyright. In this case, the general rule provided for in Art. 22 sec. 1 of the PIT Act, which states that tax deductible costs are costs incurred in order to achieve income or to maintain or secure a source of income, with the exception of the costs listed in art. 23.
As a result, the costs will be any actually incurred and properly documented expenses related to copyright in the course of the business. The provisions of the Act only exclude the possibility of using the standard of the estimate specified in Art. 22 sec. 9 of the PIT Act.
As the Director of KIS rightly pointed out in the interpretation of 6 July 2020 (No. form of a work or artistic performance and has disposed of rights or exercised its rights. It should be recognized that the terms "use" and "disposal" include the transfer of copyright or the granting of a license to use works or objects of related rights.
However, the above does not apply to taxpayers who obtain income on this account as part of their business activities.
In the case of authors who earn revenues from copyrights as part of non-agricultural business activities, the costs of obtaining revenues are included in the amount of actually incurred expenses. Taxpayers do not use 50% tax costs in this case.
Summarizing the above, we can indicate that the classification of revenues obtained by a taxpayer from copyright to the source referred to in Art. 10 sec. 1 point 3 of the above-mentioned of the Act, i.e. non-agricultural economic activity, explicitly eliminates the possibility of applying 50% tax deductible costs.