A cash payment into the supplier’s bank account cannot be included in deductible expenses

In the judgment dated March 27, 2024 (ref. I SA/Lu 33/24), the Provincial Administrative Court in Lublin ruled that a cash payment into a supplier’s bank account cannot be included in tax-deductible expenses, as it does not meet the requirements of Article 22p(1) of the Personal Income Tax Act (PIT).

Context

An entrepreneur requested an interpretation because, due to the approaching payment deadline and the lack of sufficient funds in his bank account, he decided to make a cash payment into the bank account indicated in the invoice. The value of the payment exceeded PLN 15,000. Therefore, he wanted to know whether making a cash payment into the supplier’s bank account instead of a transfer between bank accounts (i.e., from his account to the seller’s bank account) complies with the provisions of Article 22p(1) of the Personal Income Tax Act, and whether such a payment can be considered a tax-deductible expense.

In light of Article 19 of the Act – Entrepreneurship Law, the Director of the National Tax Information stated, that payments for purchased goods should be made through the entrepreneur’s own bank account, i.e., by transferring funds from their own bank account to the contractor’s bank account. Only in such a situation can transactions made within the purchase be considered as tax-deductible expenses (provided that the other requirements of the Personal Income Tax Act are met). Paying invoices by depositing cash into a supplier’s bank account does not meet the conditions set for payments made through a payment account – cash deposits into a contractor’s bank account are not considered non-cash payments.

If one-off value of the transaction exceeds the equivalent of PLN 15,000, regardless of the number of payments resulting from that transaction, the exclusion specified in Article 22p of the Personal Income Tax Act applies. In the situation of payments for purchased goods within a transaction exceeding PLN 15,000 through a cash deposit directly into the seller’s bank account, the expenses incurred for the purchase of these goods should not be considered as tax-deductible.

It is worth noting that in the context of these two provisions (Article 19 of the Entrepreneurship Law and Article 22p(1) of the Personal Income Tax Act), the conclusion arises that in the case of every transaction exceeding PLN 15,000, there is an obligation to make payments vis a payment account. Violation of this obligation, i.e., making payments entirely or partially bypassing the bank account, means that it is impossible to include the expense in the part in which the payment for a given transaction was made by skipping the payment account. Therefore, the regulations do not exclude from costs only the excess payments over the value of PLN 15,000, but any payment (regardless of its amount) made without a bank account, if it is made as part of a transaction with a value exceeding PLN 15,000.

Court decision

The Provincial Administrative Court dismissed the complaint against the individual interpretation of the Director of the National Tax Information of December 5, 2023, ref. no. 0115-KDIT3.4011.647.2023.1.DP on personal income tax.

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