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The KIS Head has taken a stance on the possibility of recognising payments of a company to its shareholders as tax deductible costs.


On February 3, 2022 the Head of the National Revenue Information Service (hereinafter: the KIS Head) issued a private tax ruling, ref. no. 0111-KDIB1-1.4010.542.2021.2.ŚS, concerning inclusion of payments to shareholders of remuneration for non-pecuniary services performed for the benefit of the company by these shareholders as tax deductible costs.

An application for a private tax ruling was filed by a company operating in the field of business and general consulting. Two individuals are the shareholders in that limited liability company. These individuals have both expertise and experience in business advisory and consulting.

Under the Companies Code, the articles of association are to be amended in such a way that the partners of the company will be obliged to perform non-monetary services to the company, in accordance with the company's needs, in the area of consulting and advisory services. In consideration of the services rendered to the company, the members will obtain an equivalent monetary consideration on prevailing market terms. Conversely, the company will use the members’ services to provide services to its clients.

The company's query was whether a cash benefit paid by the company to its shareholders could be recognised by the company as a deductible cost.

In its private tax ruling, the KIS Head pointed out that in the future situation described above, cash benefits paid to shareholders, if the general conditions are met (i.e. the cost being related to the revenue and properly documented), are tax deductible.

The KIS Head justified its position by emphasizing that, in the case in question, the provisions excluding certain expenses from tax costs will not apply.

The KIS Head pointed out first of all that the consideration provided by the company to its members represents reciprocal consideration due to the members under the applicable provisions of the Companies Code. Therefore, since partners will be obliged to provide repeated in-kind benefits to the company, for which they will receive market-level remuneration, Art. 16 (1) (38) of the CIT Act will not apply. This provision applies to non-reciprocal services provided by the company to its shareholders, which is not the case in the future event described.

Art. 16 (1) (38a) of the CIT Act will not apply, either. This provision stipulates that payments to, inter alia, the members of legal persons’ governing bodies are not tax deductible, except for the remuneration paid on account of their functions (shareholders in companies are members of their governing bodies).

The KIS Head indicated here that in the present case the exemption will not apply, either. The company shareholders who are obliged to provide certain services to the company will receive, on accounts of these services, adequate remuneration for the in-kind services provided. Thus, the exclusion referred to in Art. 16 (1) (38a) of the CIT Act will not apply, and the expenditure made by the company will constitute a tax deductible cost.


Karol Śmiałko, Tax Consultant, ATA Tax Sp. z o.o.

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