Stock surplus and income tax


Every taxpayer running a production or trade activity is required to prepare an inventory of inventory at the end of the tax year in order to determine the quantity of products and goods. The result of the inventory is then included in the annual tax settlement. In today's article, however, we will analyze the situation when, as a result of the inventory, the presence of surplus stock is found.

The stock surplus is tax revenue

Generally, it can be said that the inventory surplus is a situation in which the taxpayer has more products and goods than indicated in the accounting documents. Against this background, a dispute arose between taxpayers and tax authorities. Entrepreneurs took the position that such a surplus is tax-neutral and does not require the payment of tax. On the other hand, the tax office argued that the stock surplus was a taxable income.

Ultimately, the case was brought to the Supreme Administrative Court, which in its judgment of 16 July 2013, II FSK 2113/13, confirmed the position of tax offices and issued a ruling unfavorable for taxpayers. In the justification, we can read that the materials constituting the surplus in the warehouse should be classified as income obtained free of charge. The above thesis results from the fact that the provisions on income taxes also recognize as income the value of things or rights received free of charge or partially for remuneration, as well as the value of other free or partially paid benefits.

Disclosure of surplus stock is a statement that the taxpayer has more goods than it results from the inventory records kept by him. Consequently, it must be considered that the surplus goods were received by the taxable person free of charge. The value of things received free of charge is determined on the basis of market prices used in the trade of things of the same type and species, taking into account, in particular, their condition and degree of wear and the time and place of obtaining them.

Free service without a provider

In previous disputes with the tax authorities, taxpayers argued that we cannot deal with a free service in this case, because in the case of surplus stock there is no entity from which the benefit is obtained. In its judgment, the Supreme Administrative Court also referred to this issue.

The court assumed that, while in civil law there is no benefit without a service provider, it does not matter in tax law who provided or whether the activity of another entity was a source of a financial gain. The subject of taxation with income tax is income regardless of the type of income sources from which the income was obtained. The court made a controversial thesis that since it is not the source of income that is important, but the very fact of earning income, it is all the more irrelevant whether the income was a consequence of an act (omission) of another person or not.

In addition, in the opinion of the court, free benefits under tax law are those that have a measurable financial effect for the taxpayer, increasing the state of its assets, but do not have to result from bilateral legal or economic relations. As a result, no counterparty or other trading participant is needed to receive the free benefit.

Similar theses were presented in the judgment of the Provincial Administrative Court in Poznań of May 26, 2011, I SA / Po 312/11, where we read:

The use by the legislator of the word "received" in this provision in relation to gratuitous benefits does not contradict this either. This circumstance does not mean that there is a need for the provider and the recipient of the benefit. While recalling the dictionary meaning, the complainant omitted that in the "Dictionary of Polish language" (ed. M. Szymczak, vol. II, p. 569, PWN 1984) it was noted that the word "receive" also means "to produce, to obtain something from something" . Undoubtedly, this means one's own action and one-sided action. The word "Phraseological Dictionary of the Polish Language" (ed. S. Skorupka, vol. I, p. 628) understands this word in a similar way. as "receiving an effect". Therefore, the receipt of a free benefit may also be a consequence of one's own actions, i.e. unilateral actions.

Therefore, when it comes to the free benefit, it results in the actual state described by the taxpayer from the fact that in the event of a surplus in inventory, both as a result of a different than assumed structure of material consumption, as well as employees' mistakes resulting from errors in entering data into the warehouse system, there is no question of any consideration for anyone.

This position results from the finding that while there is no benefit in civil law without a service provider, in the Act on it is not important who was the witness, or whether the activity of another entity was a source of a financial gain. Pursuant to Art. 7 sec. 1 u.p.d.o.p. the subject of taxation with income tax is income regardless of the type of income sources from which the income was obtained. It is this principle that constitutes the basis for a different understanding of the concept of "benefit" in the context of the tax act in question from the civil law. Since the source of income is not important, but the very fact of earning income, it is even less important whether the income obtained was a consequence of an act (omission) of another person or not.

The above argumentation leads to the conclusion that the income from the surplus in inventory arises regardless of the reasons for its creation. Taxation will also occur in the event of an employee's error and error in the course of drawing up the inventory.

Stock surplus and VAT

As a rule, the scope of activities subject to VAT includes the supply of goods against payment and the provision of services against payment within the territory of the country, export of goods, import of goods within the territory of the country, intra-Community acquisition of goods for remuneration within the territory of the country and intra-Community supplies of goods.

In the case of inventory surpluses, it is difficult to assign such a factual state to any activity subject to tax on goods and services, and therefore the surplus does not result in a VAT obligation.