On 1 January 2018, an amendment to the Act on
Personal Income Tax of 26 July 1991 (hereinafter as
“PIT Act”) modifying the regime of tax deductible
expenses of authors came into force. While the new
provisions increase the limit of tax deductible
expenses of authors, they at the same time curtail
the list of eligible authors who will be able to enjoy
that legal preference.
Pursuant to the PIT Act, the tax deductible
expenses incurred on the earning of some types of
revenue are set at 50 percent of the revenue
earned, providing that during the tax year the
aggregate expenses incurred on the earning of the
revenue are below the cap amount set forth under
the PIT Act. The rate of 50 percent applies amongst
other to authors and performers on the grounds of
exercising their copyright and neighbouring rights,
respectively. The previous wording of the PIT Act
did not define the meaning of terms author,
performer or work. For these one would refer to
the Act on Copyright and Related Rights of 4
February 1994 (hereinafter as “Copyright Law”),
and the tax authorities were not entitled to
interpret the Copyright Law and by the same token
to determine the existence of a work or indeed
whether or not an individual in question is an
author within the meaning of the Copyright Law.
The amendment introduces provisions that specify
which authors and performers are eligible for the
50 percent revenue-expenses rate. Under the
amendment, the new provisions apply to revenues
generated by engaging in the following types of
activity:
- creative activity in architecture, interior
design,
landscape
architecture,
urban
planning, literature, fine arts, music, fine-art
photography, audio-visual creative work,
computer software, choreography, artistic
violin-making, folk art, and journalism; - research-and-development and research-and-
educational activity; - acting and performing arts, theatre and stage
direction, dance, circus art, and the activity of
conductors,
vocalists,
instrumentalists,
costume designers, and stage designers; - audio-visual
production
of
directors,
screenwriters, cameramen, audio engineers,
film editors, and stunt performers; - columnists and media reporting.
The amendment also increases the annual cap on
revenue expenses that authors are entitled to
apply. As from 1 January 2018, the revenue-
expenses cap corresponds to the upper limit of the
first tax bracket set forth under the PIT Act.
Previously the revenue-expenses cap was set at one
half of the above amount.
While the new regulations increasing the cut-off
amount for the application of the 50 percent
revenue-expenses rate have no opponents, the restrictions imposed on the eligibility for such
preferential tax treatment have generated some
controversy. Further, while the application of the
preferential rate has been laid out in quite some
detail, in practice many doubts may arise as to the
application of the new regulations. It is not clear
whether the work of computer graphic designers
can be treated in parallel to that of graphic artists.
There is also a question mark about authors of
advertisements or commercials, as it is hard to say
whether or not their creative endeavours fall within
the concept of audio-visual creative work. The
provisions are also bound to cause a lot of
uncertainty among those who professionally engage
in the provision of training courses. Whereas it is
quite obvious that for example academics are
involved in a research-and-educational activity, the
matter is not so clear-cut in the case of business
training courses. Neither does the amended law
make any reference to translators and interpreters.
The separate provisions regarding authors and
performers will continue to apply. Nevertheless,
neither the PIT Act, nor the Copyright Law, nor any
other regulations include sufficiently specific
definitions to dispel all the doubts. So it seems that
the amendment might have the effect of increasing
the number of requests for general tax rulings and
of court judgements.
MILLER, CANFIELD,
W. BABICKI, A. CHEŁCHOWSKI I WSPÓLNICY SP.K.
ul. Batorego 28-32
81-366 Gdynia
Tel. +48 58 782-0050
Fax +48 58 782-0060
gdynia@pl.millercanfield.com
ul. Nowogrodzka 11
00-513 Warszawa
Tel. +48 22 447-4300
Fax +48 22 447-4301
warszawa@pl.millercanfield.com
ul. Skarbowców 23a
53-125 Wrocław
Tel. +48 71 780-3100
Fax +48 71 780-3101
wroclaw@pl.millercanfield.com
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