PCC and the acquisition of an internet domain

Service

In the 21st century, when running a business, every entrepreneur must take into account the obligation to have a website. It is a requirement of a society that is moving towards modernity and new technologies. In order to appear among their potential buyers, entrepreneurs have no choice but to set up their companies' websites. The right domain name is half the battle. Therefore, businessmen do not hesitate to buy when they find the most suitable one. They acquire acquisitions both from companies and private individuals who do not run a business. Is then the purchase of the Internet domain subject to tax on civil law transactions?

Acquisition of an internet domain from an entity conducting business activity

An entrepreneur may purchase a domain from an entity conducting business activity. Then the transaction will be documented with an invoice or a bill (or an invoice without VAT). The seller, who is an active VAT taxpayer, is obliged to tax it with the appropriate tax rate. In turn, the buyer will have the right to deduct VAT from the purchase invoice, as long as it is used for taxable activity. This possibility results from Art. 86 sec. 1 of the Act on tax on goods and services.

art. 86 sec. 1.

To the extent that the goods and services are used to perform taxable activities, the taxpayer referred to in article 2. 15, has the right to reduce the amount of tax payable by the amount of the input tax, subject to article 22. 114, art. 119 paragraph. 4, art. 120 paragraph 17 and 19 and article. 124.

In a situation where the buyer makes a deduction of VAT, the cost will be the net amount from the invoice. At the same time, it should be remembered that in order for the expenditure to constitute a tax cost, it must meet the requirements set out in Art. 22 sec. 1 of the Personal Income Tax Act.

art. 22 sec. 1.

Tax deductible costs are costs incurred in order to achieve income or to maintain or secure the source of income, with the exception of the costs referred to in article 1. 23.

However, when the invoice (or bill) has been issued by an entity exempt from VAT, the buyer who is an active VAT payer will not deduct the tax, and the cost will, as a rule, be the amount shown on the purchase document.

When the domain buyer is an entity exempt from VAT, the tax deductible cost will be the gross amount from the invoice

Taxpayers who keep the tax book of revenues and expenses, the purchase of an internet domain, show in column 13 - other expenses.

 

Example 1.

The entity that is an active VAT payer purchased the domain from an entrepreneur who is also a VAT payer. The invoice amounts to PLN 300 net + 23% VAT (PLN 69). How do I correctly post a domain purchase?

The net value from the purchase invoice should be included in col. 13 KPiR - other expenses and in the VAT purchase register at the appropriate rate.

 

Example 2.

The entity exempt from VAT purchased the domain from an entrepreneur who is also a VAT payer. The invoice is for PLN 300 net + 23% VAT (PLN 69). How to properly account for the acquisition of an Internet domain?

The gross value of the purchase invoice should be included in col. 13 KPiR - other expenses.

Important!

When purchasing a domain from a business entity, the buyer does not pay tax on civil law transactions (PCC).

Acquisition of an internet domain from a private person

Natural persons who do not conduct business activity may also be owners of interesting domains. Then the entrepreneur purchasing the domain from a private person should document such a transaction with a purchase and sale contract. The cost will be the amount indicated in the contract. As in the case of a purchase from an entity conducting business activity, this expense should be included in column 13 of the tax book - other expenses.

Importantly, this transaction will not be subject to VAT, because the private person is not a VAT taxpayer. However, the buyer will, in principle, be obliged to pay tax on civil law transactions.

The PCC on domain purchase is 1% and it must be demonstrated with the PCC-3 declaration. The buyer is obliged to submit it to the tax office within 14 days from the date of the transaction.

The paid tax on civil law transactions will constitute the cost on the date of its settlement.