The solidarity tribute is a new way of taxing the income of the highest-earning taxpayers. Questions about the amount of taxable income still raise a lot of controversy (that could result in a reduction of the solidarity tribute). Recently, we have seen a positive change in the approach of the tax office in the context of deducting from its base, for example, losses from previous years or relief for bad debts. In this article, we describe these possibilities in more detail.
Who shall pay the solidarity tribute?
The levy will be paid by a person who earns the following income (exceeding PLN 1 million):
- taxed according to the tax scale (e.g. employment contract, mandate);
- income from the paid disposal of securities and other instruments subjected to 19% tax;
- income from business activity taxed with a flat-rate tax (19%);
- controlled foreign company (CFC) income.
Reduction of the solidarity tribute
For a long time, the tax office was of the opinion that it was possible to reduce the income included in the solidarity tribute, but only to the extent indicated in Art. 30h sec. 2 of the PIT Act (i.e., among others, social security contributions). At the same time, the possibility of settling losses from previous years was denied, which was extremely unfavorable for taxpayers.
However, this position has changed thanks to several rulings of the Supreme Administrative Court that have appeared recently.
Judgment of the Supreme Administrative Court II FSK 452/22 of July 19, 2022.
(…) In the opinion of the Supreme Administrative Court, the Authority’s argument that its position is justified by the content of the DSF-1 solidarity levy declaration form, in which there is no space for deducting the resulting loss, is unfounded. It should be emphasized that the disputed loss is not subtracted from the calculated solidarity levy base (as should be done in the case of social security contributions) but is taken into account at an earlier stage – determining income (in this case, income taxed with a flat tax according to the rules set out in Article 30c ), which income is a component of the calculation of the solidarity tax base (component of the total income).
Judgment of the Supreme Administrative Court II FSK 1099/22 of February 14, 2023.
(…) The provisions on the solidarity tribute (Article 30h(2) of the Act on Taxation) use the expression “taxable income”, and not only “income”. Since in the annual tax return, the income tax is calculated on the amount of income less tax deductible costs, including eligible costs, loss from the previous year and R&D relief, then this amount actually constitutes taxable income and should be the basis for calculating the solidarity levy.
Thus, there is no doubt that such deductions can be made in effect, but the open question is how, since there is no relevant place in the DSF-1 declaration.
Reduction of the solidarity tribute – we publish
In the latest article Rzeczpospolita published a comment by Piotr Sekulski PhD, which clarifies these doubts. The article is available at this link.
Tax advisor Piotr Sekulski, PhD
(…) There is no longer any doubt that taxpayers paying the solidarity tribute can deduct losses from previous years. The tax office confirms this, although it must be admitted that several judgments of the Supreme Administrative Court were needed to change its position. However, the Tax Office does not explain how these losses should be reported in the DSF-1 form. There is no proper category for it. So what to do? Do not show these losses at all, but deduct them from income before entering it in the DSF-1 declaration. This is the only logical solution and such conclusions can also be drawn from court decisions. What’s more, it shows that at this earlier stage of determining the solidarity tax base, other reliefs can also be deducted, e.g. relief for bad debts, research and development relief or the relief for fight against smog.
If you have any questions about reduction of the solidarity tribute please visit www.outsourced.pl.
