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Poland: Tax rulings on car fringe benefits, 50% deductible costs related to royalties

Poland: Tax rulings on car fringe benefits

The Ministry of Finance issued two general rulings concerning the individual (personal) income tax implications of the use of company cars for private purposes and regarding application of the 50% tax-deductible costs to income from royalties.

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Use of company car for private purposes

According to the Ministry of Finance ruling, the costs related to maintenance and general use of a vehicle, borne by the employer that makes the vehicle available to the employee for their private use, are to be classified as “flat-rate income.” The Ministry of Finance supported the uniform approach expressed by administrative courts, by which the flat-rate value of the car fringe benefit covers the costs related to the maintenance and general use of the vehicle, such as fuel, insurance, tire replacement, and current repairs or periodic inspections, which the employer, as the vehicle's owner, must incur to keep the car operational and authorised to participate in road traffic. However, certain additional charges, such as parking fees or highway tolls, are not to be treated as benefit-derived amounts covered by the flat-rate revenue. 

Applying 50% tax-deductible costs to revenues from royalties

The second ruling provides conditions that are to be satisfied in order to apply the 50% tax-deductible costs to revenue earned on account of exercising and disposing of copyrights or related rights under an employment contract or other civil law contract. To treat part of the remuneration as a royalty and available for the 50% deduction, the following requirements must be satisfied:

  • Creation of a work being the subject of copyright, conditioning the use of copyright by the author and enabling the disposal of proprietary copyright to the work
  • Providing objective evidence that a work protected by copyright was created
  • Making a clear distinction between the royalty and other components of the remuneration, except for a situation when 50% tax-deductible costs can be applied to the entire remuneration of the author.

KPMG observation

The ruling does not specify the method of determining the amount of the royalty due, and leaves the contractual freedom to the parties, citing only “negative” case-law derived premises for excluding the possibility of applying 50% tax-deductible costs by authors. Furthermore, the ruling notes the requirement that there must be proper documentation of the revenue earned from copyright and related rights and/or disposing of the rights, along with the amount. In principle, the method of establishing the documentation is arbitrary. For instance, it may take form of records or a joint statement of parties to the contract. Additionally, according to the ruling, the royalty for a given work may also be paid out, in whole or in part, before the work is created (e.g., on the date of signing the contract).


Read a September 2020 report [PDF 228 KB] prepared by the KPMG member firm in Poland

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