Principles of accounting for copyright costs under the PIT Act

Service-Tax

Taxpayers can earn revenues from copyrights. For proper settlement, it is necessary not only to correctly determine the amount of income, but also to correctly determine the costs. The issue of copyright costs was subject to frequent amendments. The beginning of 2018 also brought changes in this regard. In the article below, we will present the most important issues and changes to the PIT Act and the newly defined rules of accounting for copyright costs.

Source of income

In art. 10 sec. 1 point 7 of the PIT Act, it was indicated that the source of income in the income tax are property rights and the sale of these rights for consideration. Next, reference should be made to the content of Art. 18 of the Act, from which it follows that revenue from property rights is considered in particular revenue from copyrights and related rights within the meaning of separate provisions, rights to inventive designs, rights to the topography of integrated circuits, trademarks and ornamental patterns, including sale of these rights against payment.

Principles of accounting for copyright costs

As you know, taxable income is the difference between the income and the tax expense. Since we have explained what constitutes copyright revenue, it is appropriate to analyze the issue of costs.

This issue is described in detail in Art. 22 sec. 9 point 1 of the PIT Act. Pursuant to this provision, tax deductible costs for authors 'use of copyright and performers' related rights, within the meaning of separate regulations, or for their disposal of these rights, are set at 50% of the revenue obtained.

Art. 22 sec. 9a of the Act, which states that in a tax year the total tax-deductible costs may not exceed PLN 85,528. By the end of 2017, the limit was PLN 42,764.

It should also be pointed out that the above ceiling is not permanent and absolute. If the taxpayer proves that the expenses were higher, the expenses actually incurred are assumed to be tax deductible costs.

Example 1.

In the tax year, the copyright taxpayer earned an income of PLN 20,000. Therefore, according to the percentage standard, the tax deductible costs amount to PLN 10,000.

Example 2.

In the tax year, the copyright taxpayer earned an income of PLN 200,000. According to the percentage standard, the costs amount to PLN 100,000. However, the limit should be taken into account, which means that the taxpayer may only show costs in the amount of PLN 85,528 in the tax return.

Example 3.

In the tax year, the copyright taxpayer earned an income of PLN 200,000. In order to obtain income, the taxpayer incurred expenses in the amount of PLN 120,000. They show a cause and effect relationship with the achieved income and have been documented with relevant evidence. As a result, the taxpayer may include the entire amount of PLN 120,000 as costs.

New catalog of entities using 50% of costs

Determining the costs at 50% of the amount of income is very tax advantageous, as it allows you to reduce the tax liability. No wonder then that more and more taxpayers tried to classify their activities as copyright.

From the beginning of 2018, the possibility of using 50% of costs by any category of taxpayers is significantly difficult, because the legislator, at the beginning of 2018, introduced into Art. 22 of the PIT Act, new para. 9b, according to which the said costs apply to the revenues obtained from the activity:

  1. Creative in the field of architecture, interior design, landscape architecture, urban planning, belles-lettres, fine arts, music, photography, audiovisual works, computer programs, choreography, artistic violin making, folk art and journalism;

  2. Research and development as well as science and teaching;

  3. Artistic in the field of acting and stage art, theater and stage directing, dance and circus art, as well as in the field of conducting, vocal, instrumental studies, costume design, stage design;

  4. In the field of audiovisual production of directors, scriptwriters, image and sound operators, editors, stuntmen;

  5. Journalistic.

Although in the justification of the amendment, the legislator indicated that this provision was only clarifying, there is no doubt that it created a closed catalog of activities, which may significantly limit the possibility of using increased costs for other activities related to copyright, and new rules of accounting for copyright costs.

Another amendment in 2018 is the expansion of the catalog of entities entitled to 50% tax deductible costs. Currently, 50% of the costs are due to:

  1. 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;

  2. Artistic activity in the field of acting, stage, dance and circus arts as well as in the field of conducting, vocal and instrumental studies;

  3. Audio and audiovisual production;

  4. Journalistic activity;

  5. Museum activity in the field of exhibition, science, popularization, education and publishing;

  6. Conservation activities;

  7. The dependent rights referred to in Art. 2 clause 2 of the Act of February 4, 1994 on copyright and related rights (Journal of Laws of 2017, item 880) to prepare someone else's work in the form of a translation;

  8. Research and development, research and teaching, research and teaching activities at the university.