Settlement of a contract of mandate or contract for specific work in the net income method
24 September 2021
24 September 2021
How can I document in the net income method (Polish short form used hereafter “PKPiR”) the costs incurred for the settlement of a contract of mandate or contract for specific work and payment of remuneration to the contractor or subcontractor? Is an electronic receipt sufficient or do we need additional documents?
Accounting regulations in Poland do not directly specify what kind of evidence should be used to document in PKPiR costs incurred for remuneration resulting from civil law contracts: mandate or contract for specific work. Surely, an original bill hand-signed by a contractor can serve as such a proof.
But what if the bill was issued electronically and has no signature? Then such a cost – under certain conditions – can also be recognized in PKPiR on the basis of e.g. a bank statement which documents the remuneration transferred to the principal’s or contractor’s bank account. When remuneration is paid in cash, however, it will be necessary to confirm its receipt with a handwritten signature of the recipient.
The moment when remuneration for a civil law contract is recognized as a deductible cost is indicated in Art. 23 par. 1 point 55 of the Personal Income Tax Act. Remuneration for a commission of work or a work performed constitutes a tax deductible cost on the date of its payment. In the case of a mandate contract, the same applies to social insurance contributions, in the part financed by the principal. They are tax deductible at the time of payment to the Social Insurance Institution. Therefore, remuneration which has not been paid or made available for payment is not regarded as tax deductible costs.
It should also be borne in mind that if the principal is an entrepreneur, the remuneration of the contractor or employee may be deductible only if the subject of the agreement remains related to the contractor’s business activity and serves the purpose of earning revenue or at least preserving or protecting its source.
The gross remuneration under civil law contracts (mandate, contract of specific work) is entered by the principal or contractor in the PKPiR column 12 “remuneration in cash and in kind”. Social insurance contributions (in the part financed by the principal) should be entered in column 13 “other expenses”.
How to document tax deductible costs in the PKPiR? General rules in this respect are indicated in the Regulation of the Minister of Finance of 23 December 2019 (Journal of Laws item 2544). The basis can be accounting evidence, including, but not limited to, receipts, invoices, accounting notes, postal and bank charges, customs documents as well as other evidence proving that a business operation has been conducted in accordance with its course, including at least:
If you have any further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.