How to correctly settle the casback commission?


Cashback is now a very popular service in which the bank reimburses its client a certain percentage of the expenses that were paid by him using the card. According to the tax authorities, in such a situation the taxpayer has to deal with income from other sources, which must be shown in the annual tax return and taxed. However, according to the judgments of the Provincial Administrative Court in Wrocław, such returns are exempt from Art. 21 sec. 1 point 68 of the Personal Income Tax Act (hereinafter: the PIT Act). So how should the cashback commission received from the bank be accounted for?

For the tax authorities, the cashback commission is taxable income

According to the tax authorities, in a situation where a taxpayer receives a refund from a bank of a part of the money spent on purchases, it should be taxed. For them, the cashback commission is income from other sources referred to in Art. 10 sec. 1 point 9 of the PIT Act. Such a position was taken, among others, by Director of the Tax Chamber in Warsaw in the individual interpretation of December 20, 2012 (reference number IPPB2 / 415-810 / 12-4 / JG) and Director of the Tax Chamber in Poznań in the interpretation of February 12, 2013 (ILPB2 / 415-1025 / 12-2 / TR).

Pursuant to the aforementioned provision, income from other sources is considered, inter alia, prizes and other free benefits that do not belong to the revenues specified in art. 12-14 and 17 of the aforementioned Act, and revenues that are not covered by disclosed sources.

Cashback - what consequences for banks?

Such an interpretation of the regulations means that not only bank customers receiving the cashback commission are obliged to tax the return, but also financial institutions are subject to an additional obligation. Well, according to Art. 42a of the PIT Act, they are required to prepare a PIT-8C declaration and submit it to the taxpayer and the tax office competent for the taxpayer's place of residence by the end of February of the following tax year.

Art. 42a

Natural persons conducting business activity, legal persons and their organizational units as well as organizational units without legal personality which make payments or payments referred to in art. 20 paragraph 1, with the exception of the income (revenue) referred to in article 1. 21, art. 52, art. 52a and art. 52 c and income from which, on the basis of the provisions of the Tax Code, the tax collection has been abandoned, on which they are not obliged to collect tax advances or lump-sum income tax, are required to draw up information according to the established formula about the amount of revenues and pass to the taxpayer by the end of February of the next tax year and the tax office, which is headed by the head of the tax office competent according to the place of residence of the taxpayer, and in the case of taxpayers referred to in art. 3 sec. 2A, the tax office, which manages the head of the tax office competent in matters of taxation of foreign persons.

What do the banks say?

As it is commonly known, banks do not prepare and provide their clients who received the cashback commission with the PIT-8C declaration. According to financial institutions, such a return should be treated as a kind of bonus paid to credit card users as part of the loyalty program. Its purpose is to make their offer more attractive in the eyes of customers. Therefore, cashback does not create an obligation to collect an advance or the need to prepare the above-mentioned forms.

In their explanations, the banks refer to Art. 21 sec. 1 point 68 of the PIT Act, according to which the value of winnings in competitions and games organized and broadcast (announced) by the mass media (press, radio and television) and competitions in the field of science, culture, art, journalism and sport is tax-free , as well as prizes related to bonus sales - if the one-time value of these prizes or awards does not exceed PLN 760. However, this exemption does not apply to awards received by the taxpayer in connection with his non-agricultural business activity, constituting income from this activity.

WSA judgment on cashback commission

The administrative courts did not agree with the position of the tax authorities. According to the opinion of the Provincial Administrative Court in Wrocław, which was confirmed in as many as three judgments (reference number I SA / Wr 864/13, I SA Wr 865/13 and I SA Wr 866/13), cashback commissions constitute rewards obtained from bonus sales and are subject to exemption from the already mentioned Art. 21 sec. 1 point 68 of the PIT Act. Thus, the court overruled the interpretations of the tax authorities, which were unfavorable for taxpayers and banks.

The judgment emphasized that as a result of the performance of the service on the terms specified in the promotion, the bank was obliged to pay the customer a bonus. The essence of such a mechanism and the purpose of its payment (inclination to use the website's services, increasing customer satisfaction and loyalty) remain the same in the case of selling things and providing services connected with the bonus system. This, in the opinion of the Court, supports a broader - than civilian - understanding of the concept of bonus sales as covering not only commodity but also service transactions.

Due to disputes between tax authorities and banks, it was decided to introduce into the PIT Act provisions relating directly to the taxation of cashback. In accordance with the draft changes to the above-mentioned of the legal act of 17 October 2013, Art. 30 (1) (4b), which states that the benefits received by the bank's customers related to running a bank account will be taxed with a 19% flat-rate income tax. However, until these changes are introduced, you should follow the rulings of the Provincial Administrative Court, i.e. treat cashback as a bonus sale, on which you do not have to pay income tax.