The Supreme Administrative Court makes life easier – allocating the cost of interest on a loan for the purchase of shares

Breaking the prevailing approach of administrative courts, the Supreme Administrative Court (SAC) recently issued a judgment (ref. No II FSK 2627/20), in which it indicated that the costs of interest on a loan for the purchase of shares should be recognized as indirect costs (i.e. costs not directly related to any source of revenues) and allocated through the use of a “revenues key”.

The judgment was issued in the case of a Polish company producing and distributing alcohol. To strengthen its position on the market, the Company acquired shares in a Luxembourg holding company and a Russian alcohol company by acquiring shares of its shareholder. For this purpose, the Company took interest-bearing loans from a related entity.

In the verbal justification of the judgment, the court upheld the Company’s arguments and pointed out that costs other than those directly related to revenues should be allocated in proportion to revenues obtained from two sources of revenues – capital gains or other sources, i.e. through the use of a “revenue key”. Thus, it is not necessary to allocate indirect costs to a specific source of revenues.

The above is an expression of the high rationality of the legislator, but also of SAC itself. The intention is to make life easier not only for Polish taxpayers but also for tax authorities, which will not be forced to analyze to which source of revenues assigns indirect costs. Their participation will therefore be limited only to examining whether the allocation key has been correctly applied.

If you are repaying interest on loans taken for the purchase of shares and you are interested in analyzing the deductions made so far from your revenues, please contact our experts:

Łukasz Bączyk
Head of TaxBoard Member

Paweł Jóźwik
Tax Manager – Attorney-at-law

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