Revenue expenditure consists of expenses that reduce revenue, thus resulting in income, i.e. the taxable base. Therefore, the amount of tax we pay largely depends on revenue expenditure.

Example:

Simon and Josh share the same workplace, where they earn a basic salary of 2000 PLN. Simon lives in the town where the company establishment is located. That is why he is entitled to basic revenue expenditure of 111.25 PLN. Josh lives in another town, so he commutes to work. Therefore, he is entitled to higher revenue expenditure, namely 139.06 PLN/month.

As a result, Simon and Josh pay a monthly advance tax amounting to 111 PLN and 106 PLN respectively. With different revenue expenditures, Josh will pay tax reduced by 5 PLN, even if he earns the same revenue.

Although Josh gets 5 PLN more in salary, it is obvious that this amount does not compensate him for commuting expenses.

Definition of revenue expenditure

Both Income Tax Acts contain the same definition of revenue expenditure:

Revenue expenditure is expenditure incurred to generate revenue or to maintain or secure a source of revenue, except for expenditure listed in the Act as not included in the scope of revenue expenditure.

So the definition is short and rather simple. We write “rather” because the definition features a logical error: both the defined and defining part contain the word “expenditure”, that is: “revenue expenditure is expenditure”. Let us assume, however, that such wording was used by the legislator to say that tax expenditure (i.e. revenue expenditure) is the expenditure in both linguistic and economic terms.

In order for expenditure in a general sense to be considered tax expenditure it must be incurred for a specific purpose (to generate revenue or to maintain or secure its source).

The definition is very general. It would be difficult, however, to give a more precise definition: it would be equally true if we say that on the whole, expenditure can be anything, provided that it relates to obtaining revenue.

Based on the above-mentioned definition, it is possible to determine the necessary conditions for an expense (i.e. the expenditure in a linguistic sense) to be considered a tax expenditure item:

1. The expense must be actually incurred.

Therefore, no events resulting solely from accounting transactions, such as inventory revaluation can be considered expenditure. If any expense is incurred, it must be documented or otherwise proved.

2. The expense must be incurred to generate revenue or to maintain or secure a source of revenue.

The expense must be related to revenue. This relationship, however, as we will discuss soon, may be direct or indirect. In any case, this relationship should be unquestionable.

Example:

An entrepreneur has concluded an unfavourable contract to sell their services. Unfortunately, a contractual indemnity applies for termination. The analysis shows that performance of the contract will bring about greater losses than its early termination and payment of the indemnity. Could the payment of contractual indemnity in this situation be considered revenue expenditure?

This is only one example showing that classification or non-classification of an expense to tax expenditure is not simple at all. In the example above, there are some arguments for recognition of the expense under revenue expenditure: a taxable person decides to terminate the contract and pays the applicable indemnity to protect their sources of revenue (in order to limit losses).

The tax authorities may, however, see the situation in a different way: by paying the indemnity, the taxable person is not acting to generate revenue, or secure/maintain its source. Actually, the expense is incurred in order to eliminate a source of revenue,

3. The expense may not be included under “prohibited expenditure”.

Both Income Tax Acts include a catalogue of expenses that will not be considered revenue expenditure. Consequently, even if the expense was incurred to generate revenue, but is included in the “prohibited list”, it will not be revenue expenditure.

A separate section will be devoted to such expenses.

Direct and indirect expenditure

A relationship between revenue and expenditure may be direct or even very indirect.

Example:

A shop sells toothpaste for 7 PLN. It buys the product from a wholesale outlet for 4 PLN. In this case, the expense on purchasing the toothpaste, i.e. 4 PLN, is a direct revenue expenditure item. In order to obtain revenue from sales of the toothpaste (7 PLN), it was necessary, in the first place, to buy the product. If no expenditure had been incurred, there would be no revenue.

So in practical terms, direct expenditure consists of expenses that are indispensable to generate revenue.

With indirect expenditure, things are not so simple though. It cannot be linked directly to a specific revenue item, but there is no doubt it is necessary and justified.

Example:

A grocery shop employs a part-time cleaning lady whose salary is 900 PLN. The employee's salary will be an indirect expenditure item. This is because it is difficult to link the salary to specific revenue. Also, it cannot be unambiguously stated whether the cleaning lady's work translates into increased revenue of the shop. Theoretically, yes: few people would like to shop in a dirty place. In this case, the connection with revenue, though not direct, is rather obvious. The tax authority would have no doubt that such expense can be revenue expenditure.

Example:

John runs a business and provides repair services as part of it. In February, he books a climbing course and he would like to post that expense as revenue expenditure.

Certainly, John will have a problem explaining how the expense is related to the generation of revenue or securing its source. Indeed, it is not easy to indicate how climbing skills could come in handy for a person providing repair services.

This of course does not necessarily mean that the expense cannot be considered revenue expenditure. It is possible that John is planning to expand his business with other services such as skyscraper window cleaning, in which case this expense will no longer be doubtful. He can also perform repairs at height, so the acquisition of climbing skills becomes obviously related to revenue generation.

The above examples show that indirect costs are more problematic in interpretation, and therefore nearly all expenditure disputes between taxable persons and tax authorities concern indirect expenditure.

In order to be recognised under revenue expenditure, an expense must seek to generate revenue or maintain/secure a source of revenue. Maintenance and securing of a source of revenue means that expenses are incurred so that the “infrastructure” for earning money could serve its function further.

Example:

Trevor is engaged in a transport service business. He intends to suspend his activity for 4 months due to a lack of new assignments. Throughout the suspension period, he will continue to bear the expenses related to vehicle maintenance (restoration, fluid replacement, and overhaul). Could such expenses be considered revenue expenditure?

Yes. The expenses incurred are related to securing and maintenance of a source of revenue: it is clear that if Trevor wants to generate revenue after the suspension period, he must maintain his vehicle in a good state of repair.

Expenditure accounted for the cash or accrual basis

In essence, expenditure is deducted only in the year in which it has been incurred. This approach is known as the cash-basis recognition of expenditure.

Example:

An entrepreneur selling their goods online sold a product on 29 December 2012 and on the same day the customer's payment was credited to their bank account. The parcel was sent on 3 January 2013 and on the same day the entrepreneur paid the postage of 10 PLN. In the books, for which tax year will they post this expenditure?

Although shipping costs are related to the transaction from 2012, in accordance with the cash basis principle, they must be allocated to 2013 expenditure.

Tax regulations also provide for the accrual principle in expenditure classification.

The accrual basis for expenditure accounting is employed by corporate income tax payers and by self-employed persons who carry out full bookkeeping. The accrual basis for expenditure may also be used by taxable persons that keep the tax book of revenue and expenditure, provided that they choose this way of accounting, and that their records allow for a proper classification of expenditure.

According to this principle, revenue expenditure that is directly related to revenue, incurred in the years preceding the tax year and in the tax year itself, is deductible in the tax year in which corresponding revenue was generated.

Example:

If the entrepreneur from the previous example accounted for their expenditure on the accrual basis, then:

1) revenue was generated in 2012, as they received payment in that year; although revenue arises at the date when goods are delivered (here on the shipping day), but not later than at the date of invoice or settlement of the amount due, since the amount due was paid in 2012, the revenue was generated in 2012 as well;
2) order shipping is the expenditure directly associated with the corresponding revenue: in order to generate revenue from sales of the product, the entrepreneur had to bear the cost of shipping.

So in the accrual-basis settlement, the shipping cost should be considered the expenditure of 2012.

However, one significant point should be raised here. Revenue expenditure that is directly related to revenue, relating to revenue of a given tax year but incurred after the end of that tax year by the date of:

- preparation of financial statements, in accordance with separate regulations, but not later than the expiry of the deadline set for the submission of the statements, if a taxable person is obliged to prepare such statements; or
- submission of tax return, but not later than the expiry of the deadline set for the submission of such return, if a taxable person, in accordance with separate regulations, is not obliged to prepare financial statements;

- is deductible in the tax year in which the corresponding revenue was generated.

If the entrepreneur (an individual) from our example submitted their annual tax return for 2012 on 2 January, he would have to include the shipping costs among 2013 expenditure, even if they accounted for expenditure on the accrual basis.

This rule is intended to avoid the need to correct annual returns if expenditure was incurred in a new tax year that would be directly related to the previous year's revenue.

Thus, if a taxable person has not yet closed the previous year (or the deadline to do so has not expired), then such expenditure must be recognised in the previous year. If the year has been already closed (by way of submission of an annual tax return or preparation of financial statements), then direct expenditure must be recognised under the current year's expenditure.

Important!

Expenditure can be settled on the accrual basis only if it is directly related to specific revenue.

Revenue expenditure other than expenditure directly related to revenue is deductible on the day when it is incurred.

If such expenditure is related to a period longer than a tax year, and it is not possible to determine what part of it refers to a particular tax year, then it is considered revenue expenditure in the part corresponding to the length of the period to which they refer.

Example:

In March the company buys an annual subscription to a professional monthly magazine for 500 PLN (subscription period: April-March).

As the expenditure is related to a period longer than a tax year, it has to be accounted for pro rata. Out of 12 issues of the magazine, 9 refer to the first year, and 3 to the following one.

So the expenditure of the first year will be the amount of 375 PLN, and of the second one will be 125 PLN.

Sometimes, however, there is no way to determine whether indirect expenditure applies to the period and what the period is.

Example:

Entering lease payment is commonly referred to as the lessee's own contribution.

For tax authorities, the character of this payment is not clear though. At times, they issue interpretations where they recognise that the entering payment is not dependent on the lease duration, and agree that it should be entirely recognised among expenditure on the day when it is incurred, and sometimes they are of opinion that the payment should be settled in proportion to the lease period.

Day of revenue expenditure

A day of revenue expenditure is understood as the date when the expenditure was recognised (posted) in the books of account on the basis of a received invoice (bill), or the date when it was recognised on the basis of other evidence, if no invoice (bill) is available.

Documenting expenditure

An important, yet very troublesome issue, is that of expenditure documentation. In accordance with legal regulations, any expenditure should be properly documented, such as with an invoice or other document (i.e. payroll).

Although legal provisions in both income tax acts do not mention the issue of documenting expenditure, precise rules are delimited in the regulations concerning tax records keeping.

Therefore a question arises: could an expense that clearly meets the definition of revenue expenditure but has not been properly documented be posted as this type of expenditure?

Example:

An inspection at the premises of a taxable person operating a bakery shows that the size of business is understated. On the basis of documented purchases of flour, it is noted that the quantity is enough to bake 100,000 loaves of bread, while other evidence shows that the sales amounted to at least 150,000 loaves. The taxable person argues that they have supplied documented purchases with other purchases from parties that did not issue for them any corresponding bill or invoice.

Consequently, the tax authority estimates the revenue based on the acknowledged sales, while the expenditure remains unchanged, since, according to the tax authority, the taxable person has failed to prove that they have incurred expenses higher than the documented amount.

Was the tax authority's approach correct?

Although more often than not the tax authorities' approach is like the one described in the example above, it should be considered to be incorrect. The tax authority has determined that the taxable person baked and sold 150,000 loaves of bread, whereas the accounting records only documented the purchase of flour for baking 100,000 loaves. In other words, the taxable person must have had flour to produce another 50,000 loaves. Most likely, flour was bought, but for some reason this fact is not documented. The fact that relevant expenditure was incurred may actually be proved with any credible evidence. “One cannot share the authorities' view that a taxable person that did incur expenditure but has no evidence to prove it, will not be entitled to recognise such expenses as revenue expenditure. It should be noted here that the provisions of the Act regarding revenue expenditure do not define the rules for documenting the fact that the expenditure was incurred" (judgment of the Supreme Administrative Court of 13 March 2001, III SA 68/2000, Przegląd Podatkowy 2001, Vol. 10).

In practice, the above rules governing classification and establishment of revenue expenditure apply to the source of revenue in the form of a non-agricultural business activity.

In the case of revenue from other sources, specific expenditure provisions associated with a particular source of revenue will apply.

Revenue expenditure in employment relationship

Unfortunately, employees can hardly influence the amount of their tax expenditure. If revenue is derived from an employment relationship, expenditure is determined at a lump-sum amount specified in legal regulations. As a result, employees cannot apply real expenditure to their settlements (such as expenditure on reading material or self-education).

The lump-sum staff expenditure:

a) amounts to 111.25 PLN/month, and not more than 1335 PLN per tax year – if a taxable person derives their revenue from one service relationship, employment relationship, cooperative employment relationship and putting-out system;

For a hired employee, the employer deducts monthly expenditure of 111.25 PLN, which in the case of a full year of employment gives the amount of 1335 PLN (12 x 111.25 PLN).

b) must not exceed the total of 2002.05 PLN per tax year – if a taxable person derives their revenue from more than one service relationship, employment relationship, cooperative employment relationship and putting-out system;

If an employee works several jobs, each employer deducts for them 111.25 PLN as revenue expenditure, which does not mean that the employee will be able to disclose the full amount of expenditure thus recognised by all employers in their annual tax return, as in this case the expenditure ceiling applies.

Example:

Ann is employed in two companies. Therefore, after the year end, she received a PIT-11 tax form from each employer, stating the revenue expenditure of 1335 PLN.

However, in her annual return, she will not disclose the sum total of such expenditure (i.e. 2670 PLN), because in the case of “multi-employer employees”, the expenditure must not exceed 2002.05 PLN, so this is the amount that Ann will disclose in her tax return.

c) amounts to 139.06 /month, and not more in total than 1668.72 PLN per tax year, if a taxable person is permanently or temporarily residing in a locality other than where the company establishment is located, and the taxable person does not receive the expatriation allowance;

d) must not exceed the total of 2502.55 PLN per tax year – if a taxable person derives their revenue from more than one service relationship, employment relationship, cooperative employment relationship and putting-out system, and a taxable person is permanently or temporarily residing in a locality other than where the company establishment is located, and the taxable person does not receive the expatriation allowance.

An employee who commutes to work (because they live or stay in a locality other than where the company establishment is located) is entitled to increased tax expenditure. In order to be able to apply increased revenue expenditure, the employee must jointly satisfy three conditions:

1) the employee's place of permanent or temporary residence must be located outside of the locality where the company establishment is located; it should be emphasized here that the condition refers to the place of residence (or temporary stay), and not the permanent registered address; also it is the place of work that matters and not the registered address of the employer;

Example:

The place of residence of an employee is the same as the registered address of the enterprise that employs them, yet the establishment in which the employee actually works is located in a different locality than the enterprise's registered office.

In this situation, the employee will be entitled to apply expenditure at an increased rate.

2) does not receive the expatriation allowance;
3) is not reimbursed for the costs of commuting, except when the expenditure reimbursed has been recognised as taxable revenue.

If a taxpayer (employer) wants to apply increased revenue expenditure while calculating withholding tax, they must receive the employee's statement of compliance with the above-mentioned conditions (Article 32 para. 5 of the PIT Act). If an employee does not submit a relevant statement, the employer will not be able to charge higher expenditure while calculating withholding tax. However, this does not deprive the employee of the right to charge higher expenditure in their annual tax return.

A one-time statement is enough, as it remains valid in subsequent tax years, until a change to the facts is notified, such as change in place of residence.

When an employee ceases to satisfy the conditions for application of higher revenue expenditure, the employer calculates withholding tax with the use of a basic expenditure rate starting from the month following the month in which the employee ceased to satisfy the conditions for a reduction in tax advances.

If the annual lump-sum expenditure to which the employee is entitled is lower than their actual expenses in commuting to their place(s) of work by bus, train, ferry or public transport, then in the annual tax return such expenditure may be adopted at the amount of expenses actually incurred, but only when the employee will document such expenses with personal season tickets.

Example:

John commutes to work by train. Therefore, he buys a monthly ticket for 170 PLN.

Consequently, his annual commuting expenses reached 1870 PLN (11 months x 170 PLN; in July John did not buy a monthly ticket because he was on holiday).

We can see that his total commuting expenses are higher than the lump-sum expenditure. Therefore, in his annual tax return John will disclose the expenditure of 1870 PLN rather than 1668.72 PLN.

Lump-sum staff revenue expenditure is only applicable when the employee's revenue was only derived from the employment relationship. Such expenditure may be used by part-time employees and those on annual leave.

However, the amount of expenditure that may be included in the annual tax return will depend on the number of months worked in the tax year.

Example:

If an employee is employed under an employment contract in January, February and March, and in November and December 2012, then in the settlement for the year 2012, they will take into account tax expenditure only for those 5 months.

Importantly, an employee who has entered with one (and the same) company into one or more contracts of employment, is connected to the company with several employment relationships, and thus separately entitled to: annual leaves under each employment relationship, a certificate of work, and specific benefits (if any) such as long service pays, retirement gratuities, etc., which means that the conclusion of each contract is treated as a separate employment relationship and on an equal footing with contracts concluded with various employers.

Consequently, in order to establish staff revenue expenditure, it should be assumed that any separate contract of employment entitles the employee to revenue expenditure, regardless of whether they have been concluded with one or more employers.

Lump-sum revenue expenditure from other sources

Lump-sum revenue expenditure applies not only to revenue derived from an employment relationship. In the case of revenue derived from civil law agreements in general, lump-sum expenditure amounts to 20%-50% of revenue (with the expenditure calculated on the revenue net of social security contributions).

Lump-sum revenue expenditure: 20%

This can be applied by taxable persons who derive their revenue within the framework of contractual professional services, i.e. under contracts of mandate, specific-task contracts, or as part of a liberal profession.

Example:

Determination of the expenditure amount in the case of a contract of mandate, when a contractor is subject to compulsory social insurance:

Revenue: 2000 PLN;

Social security (ZUS) contribution financed by the contractor: 13.71% (9.76% pension insurance + 1.50% disability insurance + 2.45% sickness insurance):

2000 PLN x 13.71% = 274.20 PLN;

Revenue expenditure: 20%:

1725.80 PLN x 20% = 345.16 PLN;

(revenue 2000 PLN – social security (ZUS) contribution 274.20 PLN = 1725.80 PLN).

If a taxable person can prove that their actual expenditure is higher than the lump-sum standard rate of 20%, then they have the right to apply the actual expenditure. Such expenditure should be documented with proof stating that it has been incurred (usually an invoice).

Lump-sum revenue expenditure: 50%

A form of tax preference is 50% expenditure to which authors are entitled in general. Such expenditure applies to revenue:

- against payment to the author for the transfer of title to an invention, integrated circuit topography, utility model, industrial design, trademark or ornamental design;

- against payment of a licence fee for the transfer of the right to use an invention, integrated circuit topography, utility model, industrial design, trademark or ornamental design, received in the first licence year from the first entity with which a licence agreement has been concluded;

- against the exercise of copyright by authors and of derived rights by performing artists, as defined by separate regulations, or effecting dispositions of such rights.

Of course, the most numerous group entitled to such expenditure are authors who derive their revenue from the exercise of copyright. It is a tax preference resulting from the fact that in the case of authors, it is difficult to indicate their actual expenditure. On the other hand, the legislator suggests by this preference that it promotes creativity and the artistic output of its citizens.

With a 50% expenditure rate, the tax is in fact paid on half of the revenue.

Importantly, 50% revenue expenditure can be applied not only by persons co-operating on the basis of a civil law agreement, but also by persons employed provided that they effect dispositions of copyright as part of employment relationship (e.g. by transferring it to the employer). However, a contract of employment should specify which part of the employee remuneration refers to the author's fee related to the employee's exercise of copyright, and which part is related specifically to the performance of the employee's (business) duties.

Pursuant to the Copyright Act, the object of copyright is any manifestation of creative activity of individual character, established in any form, regardless of the value, purpose and manner of expression (work). It must therefore be an original and manifested intellectual creation. For a product of human intellect to be considered a work, it must jointly display three characteristics:

a) it must be the result of human labour (the author's effort);
b) it must be a manifestation of creative activity (the work must be original and distinctive);
c) it must have an individual character (has such work been already created? would it be possible for someone else to create it?).

If the work contains an element of individual creative activity, then we deal with a work and an author.

Legal regulations specify possible objects of copyright (e.g. musical,
artistic and photographic works), and things which could not be considered works (e.g. official documents or simple press releases).

Higher expenditure related to the transfer of copyright can be applied by employees and persons performing specific task contracts (or contracts of mandate). Such expenditure does not apply to works created in the course of business activity.

Employers are often unaware that if their employee “creates works” as part of their job, they are entitled to 50% of revenue expenditure. Tangible benefits may be obtained if such revenue expenditure is applied.

Example:

Peter Jackson owns a small advertising agency in Warsaw.

He employs 5 people under contracts of employment. Each employee earns 5000 PLN gross/month. Employees demand a pay rise, which the owner simply cannot afford.

At the moment, the employees' net pay is calculated as follows:

Gross remuneration: 5000 PLN;

Social insurance (ZUS) contributions: 5000 PLN x 13.71% = 685.50 PLN;

Basis for calculation of the health insurance contribution: 4314.50 PLN x 9% = 388.31 PLN (deduction amount: 334.37 PLN);

Income tax advance: 5000 PLN – 111.25 PLN (staff revenue expenditure) – 685.50 PLN (ZUS) = 4203.25 PLN;

4203 PLN x 18% – 46.33 PLN (1/12 of the tax credit) = 710.21 PLN.

The advance is reduced by a deductible health insurance contribution:

710.21 PLN – 334.37 PLN = 376 PLN (in rounded PLN).

So, the employee's 'clear' (net) remuneration is:

5000 PLN – 685.50 PLN – 376 PLN – 388.31 PLN = 3550.19 PLN.

Undoubtedly, the advertising agency employees are authors vested with copyright. Consequently, they are authorised to 50% revenue expenditure (the contract of employment should specify what part of the remuneration refers to the transfer of copyright to the employer, and what part is related to “ordinary” job-related duties). It might be assumed that 90% of the employee remuneration, i.e. 4500 PLN, refer to copyright, and 500 PLN is earned for other job-related duties.

Consequently, to the amount of 4500 PLN we could apply the 50% rate of revenue expenditure, and to the remaining 500 PLN, lump-sum staff revenue expenditure (111.25 PLN). Now, the employee's net pay may be calculated as follows:

4500 PLN x 13.71% (ZUS) = 616.95 PLN;

Revenue expenditure: (4500 PLN – 616.95 PLN) x 50% = 1941.53 PLN.

Income tax advance:

5000 PLN – 2052.78 PLN (revenue expenditure, i.e. 1941.53 PLN + 111.25 PLN) – 685.50 PLN
(ZUS) = 2261.72 PLN;
2262 PLN x 18% – 46.33 PLN = 360.83 PLN.

The advance is reduced by a deductible health insurance contribution:

360.83 PLN – 334.37 PLN = 26 PLN (in rounded PLN).

So, the employee's 'clear' (net) remuneration is now:

5000 PLN – 685.50 PLN – 26 PLN – 388.31 PLN = 3900.19 PLN.

So using the discretionary opportunities given by the PIT Act, the employee's remuneration has increased by 350 PLN.

Amendments effective since 2013

In looking for additional savings and proceeds, tax authorities have decided to reach into the pocket of authors.

Starting from 2013, a ceiling will apply to 50% revenue expenditure, namely the total revenue expenditure at that rate cannot exceed 1/2 of the upper limit of the first taxable band referred to in Article 27 para. 1.

In other words, the amount of revenue expenditure at the rate of 50% under titles referred to above cannot exceed 42,764 PLN. Consequently, the losers will be those authors whose relevant annual revenue is higher than 85,528 PLN.

Example:

Comparison of an author's tax burden in 2012 and 2013

A popular author wrote a book. He sold his copyright to a publishing house for 100,000 PLN.

In 2012 to that revenue we would have applied 50% revenue expenditure in full (50,000 PLN). As a result, the publishing house would have deducted the tax advance of 18% on the following income: 50,000 PLN x 18% = 9000 PLN.

In 2013, a maximum amount of authors' revenue expenditure must not exceed 42,764 PLN. As a result, our writer will earn an income of 57,236 PLN, on which the publishing house will deduct a tax advance of: 57,236 PLN x 18% = 10,302 PLN. In other words, the deduction will be by 1302 PLN higher than in 2012.

Revenue expenditure applicable to revenue from transfer of real or other property for consideration

As we know, revenue from sales of real and other property is taxable (if the transfer of real or other property occurs within 5 years or 6 months after the acquisition respectively). Here the taxable component is income, i.e. the difference between revenue and expenditure.

Revenue expenditure in the transfer of real or other property for consideration consists of documented costs of acquisition or manufacture gross of any documented outlays that have increased the value of such property and property rights as made in the period when they have been held.

Example:

In 2009 Joan buys a flat for 300,000 PLN. She fully renovates the flat (window, floor and system replacement), which costs her a total of 60,000 PLN.

In 2012 Joan sells the flat for 500,000 PLN. What revenue expenditure applies here?

In the first place, the expenditure consists of the cost of acquisition, i.e. 300,000 PLN. Another expenditure item consists of outlays that have increased the real property value in the period when Joan held it. It is obvious that a full renovation adds up to the property value, so the total expenditure is 360,000 PLN, and the resulting income is 140,000 PLN.

If the real or other property is acquired free of charge (for instance by inheritance or donation), we obviously do not have to do with any cost of acquisition or manufacture. So revenue expenditure in the case of acquisition free of charge consists of documented outlays that have increased the value of property and property rights when they were held, and the amount of inheritance and donations tax paid in that part in which the value of the property or right being transferred taxable with inheritance and donations tax corresponds to the total value of property and property rights taxable with inheritance and donations tax.

Summary

Income of a taxable person is influenced by both the revenue earned and the expenditure incurred.

Consequently, revenue expenditure is vital for tax burdens.

No wonder that all taxable persons strive for recognition of their expenses as revenue expenditure to the widest possible extent.

It is the self-employed who are able to shape their expenditure and thus their taxes to the largest extent, because they can establish their actual expenditure.

Taxable persons who derive their revenue from other sources (employment, revenue earned within the framework of contractual professional services) are definitely less free in this respect, as they are usually forced to apply the statutory lump-sum revenue expenditure.