Cashback income will be taxed

Service-Tax

Cashback is a type of cash bonus that banks offer to their clients in return for meeting the conditions specified in the contract in connection with the use of payment cards. This type of award meets its assumption and attracts customers, but it is also a problem in terms of tax settlement. It turns out that banks and tax authorities took different positions on this matter. Therefore, the legislator decided to solve this problem by amending legal acts - acts on personal income tax and corporate income tax.

Cashback and the current market situation

Banks and the tax office present separate positions on the settlement of the cashback service on the basis of income tax. In the opinion of the financial institution, this type of income should not be taxed. The tax authorities stood in opposition, recognizing this type of cash bonus as income subject to PIT.

Banks base their position on Art. 21 sec. 1 point 68 of the PIT Act. Pursuant to the provisions of the Act, the following should be considered income tax-free:

  • winnings in competitions and games organized and broadcast by the mass media (press, radio, television) and competitions in the field of science, art, journalism and sports,
  • prizes related to the sale of bonuses - if the one-time value of these prizes or awards does not exceed PLN 760. The tax exemption for awards related to bonus sales does not apply to awards received by the taxpayer in connection with his non-agricultural business activity, constituting income from this activity.

Tax offices believe that cashback (moneyback) constitutes income taxable with income tax pursuant to Art. 20 paragraph 1 of the act. Pursuant to this provision, these revenues come from other sources specified in Art. 10 sec. 1 point 9:

  • amounts paid after the death of a member of an open-ended pension fund to a person designated by him or to a member of his immediate family, within the meaning of the provisions on the organization and operation of pension funds,
  • amounts obtained from the return from the individual retirement security account and withdrawals from the individual retirement security account, including those made for the benefit of the entitled person in the event of the saver's death,
  • cash benefits from social insurance,
  • alimony, scholarships, grants (subsidies) other than those mentioned in art. 14, surcharges, awards and other free benefits not included in the revenues referred to in Art. 12-14 and 17
  • revenues not covered by disclosed sources.

In accordance with the above, the bank should issue a PIT-8C for the customer so that the customer can settle the tax on cashback income in the annual tax return. In practice, banks do not do it, as they interpret tax regulations differently.

Cashback and an amendment to the tax law

On January 1, 2015, the amendment to the Personal Income Tax Act and the Corporate Income Tax Act will come into force. In accordance with the planned changes in the settlement of cashback revenues, a standard will apply, according to which banks will be obliged to pay a flat-rate income tax of 19%. This means that they will have to submit an annual PIT-8AR declaration.

The new legal regulation on the basis of income tax was necessary to resolve the dispute between banks and the tax office, while the legislator simplified the issue of tax collection as much as possible.