Unreliable contractors who are in arrears with payments are the bane of many entrepreneurs. On the one hand, such transactions generate income, and thus income tax to be paid, and on the other hand, they do not cause any real gain. However, if certain conditions are met, it is possible to include uncollectible receivables in tax-deductible costs, e.g. when a court decision on the discontinuation of bankruptcy proceedings is obtained. Nevertheless, such orders issued by the Courts do not always meet the requirements referred to in the Income Tax Acts.
Analysing the above topic, it should be noted at the outset that according to Article 16 sec. 1 point 25 of the Polish CIT Act, receivables written off as irrecoverable, with the exception of receivables, in the part in which they were previously included in the revenues due and the uncollectibility of which has been documented in the manner specified in paragraph 2, are not considered to be tax-deductible costs.
According to the above-mentioned Article 16 sec. 2 of the Polish CIT Act, the receivables referred to in paragraph 1 point 25 are considered to be those receivables whose uncollectibility has been documented:
- a decision on non-collection, considered by the creditor as corresponding to the facts, issued by the competent authority of the enforcement proceedings, or
- the court’s decision on:
- dismissal of the bankruptcy petition when the assets of the insolvent debtor are not sufficient to meet the costs of the proceedings or are sufficient only to meet those costs, or
- discontinuation of insolvency proceedings, if the circumstance referred to in point (a) applies, or
- termination of bankruptcy proceedings, or
- a protocol drawn up by the taxpayer, stating that the anticipated procedural and enforcement costs related to the recovery of the claim would be equal to or higher than its amount.
As you can see, the legislator points to the possibility of documenting the uncollectibility of receivables by means of a court decision to discontinue bankruptcy proceedings. Nevertheless, as indicated by numerous positions of tax authorities, we are talking about decisions issued on the basis of the provisions of bankruptcy proceedings.
For example, in the recently issued tax ruling of the Director of the National Tax Information of 3 April 2026 (file reference number 0114-KDIP2-2.4010.31.2026.2.IN), it was indicated that the Company may include as tax-deductible costs receivables whose uncollectibility has been documented by a decision to discontinue insolvency proceedings in accordance with Article 361 sec. 1 point 1 and 2 of the Polish Insolvency Act, when the last of the conditions is met, in accordance with Article 16 sec. 1 point 25 letter b in conjunction with Article 16 sec. 2 point 2 of the Polish CIT Act.
On the other hand, our practice shows that in many bankruptcy proceedings concerning, in particular, natural persons who do not conduct business activity, the Courts issue decisions that not only discontinue the bankruptcy proceedings, but also repeal the decision on the termination of bankruptcy proceedings, which excludes the heirs from possible liability for the debtor’s liabilities. In addition, these decisions are not issued on the basis of the provisions of bankruptcy law, but the Courts directly adopt the provisions of the Polish Code of Civil Procedure as a legal basis.
In our opinion, based on the decisions of the tax authorities, the court decision issued in this way does not meet the requirements of point 2 letter b (discontinuation of bankruptcy proceedings), and when at the same time they repeal the decision declaring the termination of bankruptcy proceedings, they determine the failure to meet the condition referred to in point 2 letter c (termination of bankruptcy proceedings).
Thus, in our opinion, it does not follow directly from the provisions of the regulations of Article 16 sec. 1 point 25 in conjunction with Article 16 sec. 2 of the Polish CIT Act, for the purposes of recognizing such receivables in tax-deductible costs.
Of course, it is possible to find arguments to classify such a claim as tax-deductible costs, in particular that it will not be possible to recover the debt of the deceased debtor from his heirs, and the proceedings have been de facto discontinued. However, we recommend extreme caution in this regard.
Alternatively, Article 16 sec. 1 point 26 letter a in conjunction with Article 16 sec. 2a point 1 letter a could be applied to this type of receivables, which indicates that impairment losses are not considered tax-deductible expenses, provided that the tax-deductible costs are impairment losses on the value of receivables, specified in the Polish Accounting Act, on this part of the receivables, which was previously classified as income due pursuant to Article 12 sec. 3 and its uncollectibility was proved on the basis of sec. 2a point 1. At the same time, the uncollectibility of the receivable is considered probable if the debtor has died.
In other words, the death of the debtor will not justify the inclusion of the receivables against him as tax expenses. However, it will make it more likely that the receivables are uncollectible, so if the Company creates an impairment loss on this receivable, it will be able to include such an impairment loss as tax expenses.
To summarize the theses indicated in the article, in our opinion:
- it does not follow directly from the provisions of the provisions of Article 16 sec. 1 point 25 in conjunction with Article 16 sec. 2 of the Polish CIT Act, for the purposes of recognizing in tax-deductible costs receivables from discontinued bankruptcy proceedings under the provisions of the Polish Code of Civil Procedure;
- however, on purpose, we find arguments to classify such a claim as a tax-deductible costs, in particular that it will not be possible to recover the debt of the deceased debtor from his heirs, and the proceedings have been discontinued;
- Alternatively, due to the fact that the death of the debtor makes the receivables uncollectible, it would be possible to create an impairment loss for a given receivable, which could be included in tax expenses. However, this must be confirmed each time with the taxpayer’s auditor.
