Value of liquidated useless inventory as tax cost


Can inventory loss be a tax deduction?

Can inventory loss be a tax deduction? Reading Art. 16 sec. 1 of the Corporate Income Tax Act (hereinafter: the CIT Act) listing expenses that a taxpayer cannot classify as tax deductible costs, we will not find an item relating to inventories. Such an interpretation was also made by the Director of the Tax Chamber in Katowice in the individual interpretation of 18/12/2013, ref. No. IBPBI / 2 / 423-1220 / 13 / MO.


The taxpayer asked whether he could include as tax deductible costs the costs of actually liquidated material inventories (raw materials, materials, spare parts, semi-finished products, components, etc.), which have lost their usefulness and are not suitable for the production of equipment (provision of services) and servicing .

The company is a supplier of cash registers and fiscal printers with their comprehensive service. In connection with its activities, it buys supply materials and commercial goods (raw materials, materials, parts, spare parts, semi-finished products, components, goods, etc.), which constitute inventory.

The purchased goods and materials are used for the production of devices, warranty and post-warranty repairs, the provision of maintenance services and for the renovation of owned machines.

Most of the products in the company's offer are the result of its own production, according to its own technology.

Due to the type of activity - servicing its own devices - the company must maintain a constant stock of parts, components and materials used for manufactured and sold products.

The taxpayer was of the opinion that the cost of liquidated inventories could be recognized as tax deductible costs, referring to Art. 15 sec. 1 of the CIT Act.

Pursuant to this article, deductible costs are expenses incurred with the intention of earning income or maintaining or securing the source of income, in addition to the costs listed in art. 16 (1) of the CIT Act. The last article does not mention losses in inventories, so they can be classified as tax deductible costs.

It is economically justified for a taxpayer to maintain stocks at an appropriate level. Its purpose is to generate revenues and secure and preserve their source. The liquidation process will take place due to technical progress, changes in market requirements, obsolescence, etc. Therefore, the inclusion of liquidated inventories in the tax costs is fully justified.

In addition, the taxpayer draws up a liquidation report and scraps it. The scrap he recovers is sold by him.