The electronic portal of the National Register of Debtors (Pol. KRZ) has been operating for some time. It is an electronic, publicly available register in which announcements on bankruptcy or restructuring proceedings are published.
Are the documents downloaded from there relevant to the settlement of bad debts in CIT?
At the outset, let us remind you that the so-called “costing” of uncollectible receivables, previously accounted for as revenue due, may take place either through it:
A. “definitive” write-off – Article 16 sec. 1 point 25 of the Polish CIT Act;
B. impairment allowance – Article 16 sec. 1 point 26a of the Polish CIT Act.
We omit the issue of the so-called “bad debt relief” here.
Pursuant to Article 16 sec. 2 of the Polish CIT Act, in the event of a write-off of receivables, the creditor must have one of the following documents:
a) an (execution) resolution on non-collection;
b) the court’s decision on:
i. dismissal of the bankruptcy petition if the assets of the insolvent debtor are not sufficient to satisfy the costs of the proceedings or are sufficient only to satisfy these costs, or
ii. discontinuation of bankruptcy proceedings, if the circumstance listed in letter a occurs, or
iii. termination of bankruptcy proceedings, or
c) a report drawn up by the taxpayer, stating that the expected costs of litigation and enforcement related to the recovery of the claim would be equal to or higher than its amount.
In the case of an impairment allowance, it is required to recognise such an impairment loss (within the meaning of the accounting regulations) and to meet one of the following conditions:
a) the debtor has died, has been deleted from the Central Registration and Information on Business, put into liquidation or has been declared bankrupt, or
b) restructuring proceedings have been opened or an application for approval of an arrangement has been filed in the proceedings for approval of an arrangement referred to in the Polish Restructuring Act, or settlement proceedings have been initiated within the meaning of the provisions on financial restructuring of enterprises and banks, or
c) the claim has been confirmed by a final court decision and referred to enforcement proceedings, or
d) the claim is challenged by the debtor by way of a court action.
As you can see, in the case of premises related to bankruptcy or restructuring, it is important to have documentation of relevant court decisions. However, the taxpayer will not always have them at his disposal directly. Often, he will not be a party to such proceedings at all.
In such a case, can the answer be to have an appropriate (electronic) announcement from the KRZ?
According to the author, the answer is yes. The KRZ is the “official” official register. Importantly, according to Article 219 sec. 1a of the Polish Bankruptcy Act, judgments at the time of their issuance are recorded together with the justification only in the (KRZ) system handling court proceedings with the use of templates made available in this system and provided with a qualified electronic signature.
So far, the Director of the National Tax Information has issued one individual interpretation (on 27 March 2023, file reference number 0114-KDIP2-2.4010.52.2023.1.IN), according to which this approach is correct:
In this interpretation, the authority agreed with the following position of the taxpayer:
- in the light of the provisions of the Polish CIT Act, the taxpayer may consider a write-down on the value of receivables that was previously classified as revenue due pursuant to Article 12 sec. 3, if their uncollectibility has been substantiated by the declaration of the debtor’s bankruptcy, in the form of a printout from a publicly available portal https://krz.ms.gov.pl a published announcement on the issuance of a court decision on the declaration of bankruptcy of the debtor, i.e. without court stamps;
- in the light of the provisions of the Polish CIT Act, a company may consider a receivable that has previously been recognised as revenue due as a tax-deductible cost if its uncollectibility has been documented by a court decision on the termination of bankruptcy proceedings, in the form of a printout from a publicly available portal https:// krz.ms.gov.pl a published announcement on the issuance of a court decision on the completion of the debtor’s bankruptcy proceedings, i.e. without court stamps.
