Electronic invoice received from a foreign contractor

INDIVIDUAL INTERPRETATION of March 30, 2007, reference number 1471 / DPR1 / 423/1/07 / MK, The First Masovian Tax Office in Warsaw

Invoices issued by foreign contractors to the bank sent electronically may constitute the basis for recognition of expenses incurred on their basis as tax deductible costs.

In order for a given expense to be classified as tax deductible costs, it must be related to the business activity conducted by the taxpayer, and incurring it must be aimed at generating income. However, such expenditure must be properly documented. The lack of relevant documents, in line with the adopted jurisprudence, makes it impossible to classify a given expense as tax deductible costs. The above-mentioned provision of Art. 15 sec. 1 of the Act on p.d.o.p. does not define the rules for documenting expenses classified as tax deductible costs. However, pursuant to Art. 9 sec. 1 above of the Act, the taxpayer was obliged to keep accounting records, in accordance with separate regulations, in a manner ensuring the determination of the amount of income (loss), tax base and the amount of tax due for the tax year. These separate provisions are the Accounting Act of September 29, 1994 (Journal of Laws of 2002, No. 76, item 694, as amended), which in Art. 20 paragraph 2 provides that the basis for entries in the books of accounts are evidence confirming the performance of a business transaction, hereinafter referred to as "source evidence", including external external evidence - received from contractors. At the same time, in art. 21 sec. 1 above of the Accounting Act, it was specified that the accounting document should contain at least:

1. specification of the type of proof and its identification number
2. identification of the parties (names, addresses) carrying out the business transaction
3. description of the operation and its value, if possible, also expressed in natural units
4. the date of the operation, and if the proof was prepared on a different date - also the date of the proof
5. the signature of the issuer of the certificate and the person from whom the assets were issued or received
6. confirmation of verification and qualification of the evidence for inclusion in the accounting books by indicating the month and the manner of its recognition in the accounting books (assignment), signature of the person responsible for these indications.

The taxpayer, recognizing certain expenses as tax deductible costs, obtains evident benefits, because these costs are reduced by the tax base. When making a decision on incurring specific costs, the bank should justify the relationship between the cost and income on the basis of rational and objective premises. The taxpayer bears the burden of proof in terms of proving the cause and effect relationship between the expenditure incurred and the income obtained. Only on the basis of documents confirming the actual performance of the service, the Bank has the right to include the incurred expenditure as tax deductible costs. It should be noted the essence of the evidence of the provision of services in control or tax proceedings. Pursuant to Art. 180 § 1 of the Act of August 29, 1997 - Tax Ordinance (consolidated text: Journal of Laws of 2005, No. 8, item 60, as amended), everything that may contribute to to clarify the matter, and it is not against the law. Evidence in tax proceedings, in accordance with art. 181 above. of the Act, may be, in particular, tax books, declarations submitted by a party, testimonies of witnesses, expert opinions, materials and information collected as a result of the inspection, tax information and other documents collected in the course of verification activities or tax audits, subject to Art. 284a § 3, art. 284b § 3 and article. 288 § 2 and materials collected in the course of a validly concluded criminal proceedings or proceedings in cases of tax offenses or tax offenses. The expression "in particular" used by the legislator indicates that the catalog of evidence is open. It is therefore advisable to have (in terms of possible audit or tax proceedings) all evidence confirming the occurrence of a given economic event. The facts presented in the application show that the invoices received by the Bank electronically from foreign contractors do not meet all the requirements set out in the above-mentioned art. 21 sec. 1 of the Accounting Act, e.g. the signatures of the invoice issuer are missing. However, these invoices were issued on the basis of agreements concluded by the Bank with contractors who, pursuant to them, provide the Bank with specific services. At the same time, these invoices are verified by the Bank and additional documentation is prepared, which is attached to the invoices, allowing to state that the expenses confirmed by invoices were incurred in connection with the Bank's operations. Therefore, it should be emphasized that in a situation where the Bank, in addition to the above-mentioned invoices have other evidence that allows them to be associated with the service provided and indicating a cause and effect relationship between the expenditure and the revenue generated (functioning of the taxpayer), then the expenditure may be considered a tax expense. To sum up, the provisions of the Corporate Income Tax Act do not directly define the rules and method of documenting expenses. The cited provision of Art. 9 sec. 1 of the Corporate Income Tax Act refers to separate provisions, according to which taxpayers are required to keep accounting records, on the basis of which it will be possible to correctly determine the amount of income, tax base and tax due for the tax year. Therefore, the Act refers to the norms of the balance sheet law, which means that the accounting books should be kept reliably, without errors, verifiable and timely, and the transactions should be documented in the manner indicated in Art. 21 sec. 1 of the Accounting Act, which article enumerates which elements should be included in the accounting voucher. The legislator does not impose any technical solutions as to the method of documenting costs, but emphasizes that the kept accounting records are to ensure the determination of income, tax base and due tax. At the same time, the provisions of the Act - Tax Ordinance require, in order to establish the actual state of affairs, to rely on all the evidence - obviously not contrary to the law. Such evidence should confirm the actual performance of the service as well as the purposefulness and rationality of the incurred expense from the point of view of the conducted business activity and in the context of its cause and effect relations with the achieved or expected revenues. In connection with the above, invoices issued by foreign contractors to the Bank, sent electronically, in the opinion of the local tax authority, may constitute the basis for recognizing the expenses incurred on their basis as tax deductible costs, however, if the conditions set out in the above-mentioned provision of Art. 15 sec. 1 of the Corporate Income Tax Act. With the above in mind, it was decided as at the outset. This provision concerns only the facts presented in the application and the legal status applicable in this actual state.