Expansion relief – basic information
The expansion relief was envisioned as one of the forms of support introduced in 2022 by a package of laws called the Polish Deal. Beneficiaries of the relief are entrepreneurs who have incurred costs related to activities aimed at increasing revenue from product sales.
Important!
In the context of the relief in question, only products directly produced by the taxpayer and intended for sale to unrelated parties are considered products.
Expansion in the relief’s name means that it can benefit entities that seek to expand their influence and enter new markets – most often abroad.
A particularly important feature of the expansion allowance is that it allows qualifying expenses to be accounted for twice – first as a deductible expense and then as a deduction caused by the allowance.
Deduction limit
The expansion tax credit has a deduction limit. Its value has not changed since 2022 – a taxpayer can deduct no more than PLN 1,000,000 in a tax year.
Who can benefit from the expansion relief?
In the context of taxes
The relief in question can be used by PIT taxpayers who earn income from non-agricultural business activities and use a graduated tax scale or flat tax.
The expansion allowance is also available to CIT taxpayers – but only if they use the classic corporate income tax. It is worth remembering, however, that if an entity uses the flat tax on corporate income(Estonian CIT), it can no longer choose any other tax relief, including the expansion relief.
In the context of activities
More important, however, is the question of who this relief was created for. It is about manufacturers – companies that make their own products and then sell them.
Important!
The expansion relief was created for manufacturers – companies that produce their own products and then sell them to unrelated parties. Thus, companies that buy finished goods for resale (e.g., online stores) will not benefit from the preference, but neither will companies that manufacture products on commission.
What criteria must be met to qualify for expansion relief?
If you want to apply a tax deduction, you must meet one of three criteria. For each of them, the time frame is important. The conditions discussed must be met within the next 2 tax years – counting from the tax year in which you incurred the cost of increasing revenue from the sale of your own products. The relief will work for you if:
- increase the revenue from the sale of products in relation to the revenue from such sales determined on the last day of the tax year preceding the year in which these costs are incurred , or
- you will generate revenue from the sale of products not previously offered or
- you will generate revenue from the sale of products not previously offered in the country.
Remember, too, that only income taxed in Poland is taken into account for the purposes of the above conditions.
Important!
Products not yet offered is a rather general term that is sometimes interpreted in different ways by entrepreneurs.
However, the individual interpretation issued by the Director of the KIS explicitly states that the introduction of changes in the product regarding grammage, formulation, form of packaging or manufacturing technology will not make the product classified as not previously offered.
What expenses are deductible under the expansion allowance?
Now that we’ve established who can take advantage of the tax preference and under what circumstances, it’s time to find out what specific costs can be tax-deductible without hindrance.
If you attend trade fairs, shows and industry events, you can deduct:
- Exhibition space reservation costs,
- The cost of airline tickets (for employees and those representing the company) – important: the cost of travel by company car cannot be deducted in this way,
- Accommodation and food costs.
If you have active promotional activities, you can deduct:
- The cost of paying for press and media publications,
- costs of preparation, design and printing of promotional materials – banners, flyers, brochures, catalogs, etc,
- The cost of purchasing or renting advertising space,
- Costs of design, implementation and positioning of websites,
- The cost of working with influencers.
If you need to adapt your product packaging to the rules of the new markets, you can deduct:
- The cost of legal consultations to bring products into line with market requirements,
- The cost of designing new packaging,
- Packaging production costs (including label printing).
If you prepare the necessary documentation to enable your company to sell products, you can deduct:
- Costs of legal consultations,
- The cost of preparing documentation (e.g., for certification of goods and registration of trademarks or for entering tenders).
Important!
The above catalog of deductions for the expansion allowance is closed. It is not possible to deduct from the tax base any expenses other than those listed above.
It is worth evaluating whether an expense qualifies for a deduction on a case-by-case basis. When in doubt, consult the person who handles your company’s accounting or apply to the Director of National Tax Information for an individual interpretation.
Pro-growth tax relief – individual interpretations of the Director of National Tax Information
Although the catalog of deductions is – in theory – closed, it is not precise enough. Not surprisingly, entrepreneurs often have doubts about which expenses they can qualify for a deduction under the expansion allowance. Individual interpretations that have already been issued to date may be helpful in resolving them.
Trade fair participation and transportation costs
These issues were clarified by an interpretation dated November 3, 2023 (file 0111-KDIB2-1.4010.297.2023.2.DD).
The director of the KIS concluded that it was possible to deduct the costs:
- Preparation and purchase of advertising materials to be used at the fair,
- Renting exhibition space,
- The execution of booth decor,
- The salary of the advertising agency providing hostess services,
- transportation by car of equipment necessary for the organization of the exhibition site.
In turn, the authority rejected the deductibility of the costs:
- transporting employees to the fair site in a company car,
- train tickets,
- salaries for employees participating in the fair.
Interpretacja z 13 grudnia 2023 r. (sygn. akt 0114-KDIP3-2.4011.874.2024.4.MT) wskazała, że możliwe jest odliczenie kosztów związanych z:
- paying for the company’s participation in the fair,
- Purchase of advertising space,
- Renting space for a company booth,
- Booth service (utilities, cleaning, decoration, pay for people participating in the fair).
Important!
The KIS Director’s position may be questionable, since in the November 2023 interpretation cited above, he excludes the deductibility of salary costs for employees participating in trade fairs, while the December interpretation already allowed them to be deducted.
However, it is worth remembering that the devil is often in the details, and the situations presented by entrepreneurs differed. It is for this reason that the safest solution is to apply for an individual interpretation on your own when necessary.
Packaging costs
One of the items appearing in the catalog of expenses eligible for deduction under the pro-growth tax credit is the customization of packaging to meet the requirements reported by contractors.
The doubts were related precisely to the issue of requirements. According to the guidelines, costs related to the preparation (design, printing of labels, production) of packaging for products that a company markets on its own
What’s more, the DKIS indicates that an entity that specializes in packaging (produces only packaging) cannot benefit from the relief in this context, since it does not produce packaging for other of its own products, but only goods that serve the function of packaging for contractors. For a broader rationale, see the interpretation of July 7, 2023 (file reference 0114-KDIP2-1.4010.274.2023.3.KW).
Other interpretations worth knowing
The director of the KIS has already issued dozens of individual interpretations on the pro-growth tax credit, so we are unable to cover them all in this article. Some of them clarify very important issues, and reading them may save you from having to send your own inquiry to the National Tax Information Service.
Interpretations worth paying attention to:
- Subject: meeting the conditions for the increase in revenue from the sale of products offered – interpretation of December 16, 2024 (file 0114-KDIP2-1.4010.564.2024.1.KW).
- Subject: costs of packaging customization (translation of labels, graphic designs) and costs of participation in trade fairs – interpretation of February 28, 2024 (file 0114-KDIP2-1.4010.697.2023.2.KW).
- Subject: preparation (completion) of products (computers) for individual customer orders – interpretation of November 9, 2023 (file 0111-KDIB1-1.4010.539.2023.2.AW).
- Topic: use of influencers in the context of the expansion tax credit – interpretation of October 16, 2023 (file 0111-KDIB1-3.4010.391.2023.1.JKU).
How to take advantage of the relief?
To take advantage of the expansion allowance, costs must be deducted in the annual return for the year in which the company incurred costs that qualify for the deduction.
This is particularly important in the context of possible losses – if your company for a given year shows a loss or income that does not exceed the amount of the deduction, you can take advantage of the deduction by taking it into account in your tax returns for the next 6 tax years that follow immediately after the year in which your company acquired the right to take the deduction.
The allowance is included in PIT-36 or PIT-36S returns if you have earned income from business activities taxed on the tax scale. Use the PIT-36L or PIT-36LS return if your business activity is taxed under the flat tax.
