Methods of recording costs in the KPiR - what are they?
Entrepreneurs running the KPiR include in it those costs that meet the requirements of Art. 22 sec. 1 of the PIT Act. Pursuant to this provision, a tax expense is the cost incurred in order to generate income, maintain or secure a source of income. Importantly, the method of recognizing tax costs in the book is influenced by the methods of recording costs, as well as the type of expenses incurred. When running the KPiR, taxpayers may use one of the two methods of recording costs: simplified (cash) or accrual method. Therefore, the question arises which method of accounting for costs to choose?
Cost accounting methods: simplified method
As the name suggests, this method is supposed to simplify the settlements of entrepreneurs. It consists in the fact that the tax deductible costs are deducted only in the tax year in which they were incurred. For taxpayers who keep the KPiR, the date of the costs incurred is the date of issuing the invoice, bill or other evidence constituting the basis for booking the cost incurred - the date of their payment does not matter.
The taxpayer received an invoice for the telephone issued on December 31, covering telecommunications charges for December and subscription for January. On what date should he enter this invoice into the FPC when he uses the simplified method?
The date of incurring the cost is the date of issuing the invoice. In accordance with the above, the value of the entire invoice (fees for December + subscription for January) should be included once, on the date of issue of the document.
The entrepreneur has acquired a civil liability insurance policy covering the period from July 1, 2016 to June 30, 2017. The policy issued in this way covers two tax years. How such a cost should be booked in the KPiR when the entrepreneur uses the simplified method?
Similarly to the first example, if the entrepreneur uses the simplified method of cost settlement, the date of incurring the cost is the date of issuing the document, and thus the value of the entire policy should be included on the dateJuly 1, 2016
The simplification in the cash (simplified) method does not apply to all expenses. The exceptions are, among others wages and salaries paid and social security contributions paid by the employer. Such expenses are booked on the actual date of payment.
Methods of recording costs: accrual method
Taxpayers maintaining the KPiR may choose the accrual method voluntarily. The condition that must be met by such a book is that it should be kept in a way that allows for the identification of tax-deductible costs relating to a given tax year.
Taxpayers choosing the accrual method must recognize and settle the costs on different terms:
directly related to revenues (so-called direct costs), i.e. those that have a direct impact on the achievement of revenues;
other than directly related to revenues (so-called indirect costs) related to the total activity conducted.
Indirect costs (similarly in the simplified method) are deducted on the date of issuing the invoice, bill or other evidence constituting the basis for booking. The difference is that in the case of the accrual method, it is not always possible to settle the entire value of indirect costs incurred. If these costs relate to a period exceeding the tax year, and the entrepreneur is not able to determine which part relates to a given year, then these costs constitute tax deductible costs proportionally to the period to which they relate. This means that these costs have to be broken down into the tax years they relate to.
The taxpayer received an invoice for water, issued on December 28, 2015, covering fees for December 2015, January and February 2016 in the amount of PLN 300. How should the invoice be included in the KPiR when it uses the accrual method of recognizing costs?
The water invoice is an indirect cost. Due to the fact that it covers two tax years, it should be divided into the tax years to which the expense relates. The amount of PLN 100 should be included in the KPiR in December 2015, while the remaining amount - PLN 200 - in January 2016.
The entrepreneur purchased a subscription to the industry magazine X for 2016. The purchase invoice was issued on December 15, 2015. How to book an invoice in the KPiR when the taxpayer uses the accrual method of recognizing costs?
In this situation, the cost should be disclosed in the KPiR in January 2016.
The situation is different, however, with direct costs incurred in a given year or in the following year (but until the date of submitting the tax return) - according to thismethods of recording costs they should be included in the year in which the corresponding revenues are achieved.
Chosencost accounting method must be used throughout the tax year. It is possible to change it only at the beginning of the new year. Importantly, a changemethods of recording costsdoes not have to be reported to the tax office
Specific costs and methods of recording costs
Certain tax-deductible costs have specific rules for settlement rules for settlement rules. The method of their recognition in the KPiR is independent of the cost accounting method used. This applies, inter alia, to to ZUS contributions and employee salaries.
Employee wages in costs
The funds from the employment relationship and social security benefits paid by the entrepreneur constitute tax deductible costs in the month in which they are accrued. The condition is the payment of receivables in accordance with the provisions of labor law or the signed contract. In the event of failure to meet the deadline, these receivables are a tax expense at the time of their payment.
At ABC, salaries are paid by the 10th day of the month for the previous month. The salary for December 2015 was paid on January 10, 2016. In what month should the salary be shown in the company costs?
The remuneration should be included in the KPiR in December 2015, i.e. in the month for which it was calculated, as it was paid on time.
XYZ's internal regulations stipulate that the employer pays wages to employees (employed under a contract of employment) by the 10th day of each month. The employer was late with the transfer of funds for January 2016 and paid them only on February 16, 2016. On what date should the remuneration be disclosed in company costs?
If the employer made the payment of remuneration in the period following the date specified in the internal regulations, such payments are treated as costs of the enterprise only on the date of their actual payment, i.e. they should be shown in the KPiR under the date of February 16, 2016.
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Social security contributions of employees in costs
As in the case of wages and salaries, it is the case with ZUS contributions. The rules for recording them are set out in Art. 22 sec. 6bb of the PIT Act. This act stipulates that social security contributions in the part financed by the payer of contributions, contributions to the Labor Fund and the Guaranteed Employee Benefits Fund constitute tax deductible costs in the month for which they are due - however, two conditions must be met:
premiums will be paid for payments paid or made available in the month for which they are due - within the period specified in separate regulations;
premiums will be paid for payments made or made available in the next month, within the time limit resulting from the provisions of labor law, contract or other legal relationship between the parties - no later than by the 15th day of that month.
In a situation where these deadlines are breached, contributions should be included in the costs only on the date of their payment.
ABC pays employees' salaries for a given month by the last day of the month. The remuneration for September 2016 was paid on September 30, 2016. Social security, FP and FGŚP contributions were paid by October 15. When can an entrepreneur include them in tax deductible costs?
In line with the rules described above, the September contributions paid by October 15th will be the September tax expense.
Other specific costs
For other costs settled in a special way independent of the chosen one methods of cost accounting also include:
contributions to the Social Fund - will be the cost on the date of payment of funds;
interest on loans and credits - will become a cost upon their settlement;
tax exchange differences - they are costs if they are realized.
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