one from forms of support to entrepreneurs in relation to the pandemic COVID-19 is a loan to micro-entrepreneurs. It may be granted up to 5,000 PLN and is intended to cover the current needs of entrepreneurs, for example costs associated with conducting business activities or paying contributions.
The condition is that a micro-entrepreneur must be established before the 1 April 2020, In order for the loan to be decommissioned, the micro-entrepreneur must carry out business activities for a period of time three months from the date of granting the loan.
Everything looks clear, but will a micro-entrepreneur have to pay income tax on this much needed support? Fortunately, no. The decommitted loan to micro-entrepreneurs (paid from the Labour Fund) will not be treated as income from non-agricultural business, as confirmed by Article 14(2)(6) Act of 26 July 1991 on income tax on individuals (i.e. Journal of Laws of 2019, item 1387 late), i.e.:
The income from economic activities is also: (...) the value of decommitted or outlawed liabilities, subject to section 3 point 6, of which loans drawn up, except loans from the Labour Fund
and by analogy in Article 12(1)(3) Act of 15 February 1992 on corporate income tax (i.e. Journal of Laws of 2020, item 1406):
Revenue, subject to section 3 and 4 and Article 14, are in particular: (...) value, subject to section 4 point 8, decommissioned or expired:
(a) commitments, including loans (credits), with the exception of decommitted loans from the Labour Fund,
(b) funds in bank accounts - in banks
In addition, provisions Article 15 oz section 7 and section 10 Act of 2 March 2020 specific prevention, prevention and eradication solutions COVID-19, other infectious diseases and the resulting crisis situations (Journal of Laws of 2020, item 374, (a) provide for the following:
The loan and interest shall be decommissioned, provided that the micro-entrepreneur continues to conduct business for a period of time 3 months from the date of granting the loan.
(…) Income from the redemption of the loan on the terms set out in section 7, does not constitute income within the meaning of the provisions on personal income tax and corporate income tax.
The above was also confirmed in response to the No. 6297 to the Minister of Finance on the tax on aid to entrepreneurs received in connection with the pandemic COVID-19, In which the following questions were asked, among others: ‘Are the funds paid to aid to firms and entrepreneurs in the form of loans taxed?
Are they treated as income?’, ‘Will the decommissioned part of the loan be taxable income?’, ‘Is a one-off loan of 5,000 PLN is revenue and will it be taxed?’ In response given under the authority of the Minister of Finance by the Undersecretary of State in the Ministry of Finance Jan Sarnowski, it can be read that:
„Act o COVID-19, introducing the possibility to redeem a one-off loan to 5,000 PLN, At the same time, it excluded from tax the value of the income generated by its redemption. Based on Article 15zzd(10) Act on COVID-19,the proceeds from the redemption of such a loan shall not constitute income within the meaning of the provisions on personal income tax and corporate income tax."[1]
[1] The entire text of the interview and the answers to it can be found at: www.sejm.gov.pl/Sejm9.nsf/interpelation.xsp?documentId=B74C14758DA35C0FC125856D004B0AAC
Written by Michał Zdanowski
Tax consultant in Russell Bedford Poland.
Graduate of the Faculty of Law and Administration at the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies at the University of Warsaw. During his studies he gained experience in law and tax law firms. Since September 2013 He is associated with Russell Bedford Poland. Specialises in documenting transactions between related parties.