Whether Separate Accounting Must Be Continued
The transition from a contractual regime to a licensing regime does not in itself mean that separate tax accounting may automatically be discontinued. The determining factor is not the name of the document under which the activity is conducted, but the existence of separate categories for which the Tax Code establishes special taxation conditions.
Article 210 of the Tax Code classifies, in particular, a subsoil use contract, certain types of activities, deposits or groups thereof, types of income, sales turnover, construction projects, and tax rates as such categories. If, after the transition to the licensing regime, the taxpayer retains taxable items, transactions, or areas of activity that must be accounted for separately under the Code, separate accounting must be continued.
In other words, termination of the contract is not in itself sufficient grounds for combining all income, expenses, and other accounting items. It is first necessary to determine whether the obligation established by the Code to separate them on other grounds remains in effect.
What to Check After the Transition
The company should compare the operating conditions before and after the transition. It is particularly important to determine:
- which taxable items were related to the contractual activity;
- which rights, obligations, assets, income, and expenses are transferred to the licensed activity;
- whether any other activity is conducted concurrently;
- whether taxation conditions that differ from the generally established conditions apply to specific transactions;
- whether separation by deposits, types of activities, income, turnover, or tax rates is required;
- whether there is common income and expenses that cannot be directly attributed to one category.
The taxpayer may not combine taxable items and related items in categories for which the Code requires separate accounting. Therefore, the decision should be made separately for each separate category, rather than solely on the basis that the contract has been replaced by a licence.
If there are no special grounds for separation after the transition, the accounting procedure may be revised. However, this conclusion must be supported by an analysis of the applicable provisions and the company’s actual business structure.
How to Arrange Accounting in Practice
The taxpayer independently establishes the procedure for maintaining separate tax accounting in its tax accounting policy. The policy must specify the list of separate categories, the composition of common income and expenses, and the methods for allocating them between individual areas and other activities.
When transitioning to the licensing regime, it is advisable to:
- Conduct an inventory of accounted items, balances, income, expenses, and obligations as of the transition date.
- Determine which indicators relate to the completed contractual period and which relate to the licensed activity.
- Review the rules for allocating common expenses and ensure that they correspond to the actual activities.
- Make the necessary amendments to the tax accounting policy and internal registers.
- Retain the documents and calculations substantiating the selected accounting and allocation procedure.
Particular attention should be paid to transactions relating both to the contract period and to the subsequent licensed activity. They may not be arbitrarily transferred between categories. The basis for attributing indicators must be consistent, supported by documentation, and reflected in the accounting policy.
The final approach depends on the specific terms of the licence, the composition of the items, and the applicable tax provisions. If the transition affects several deposits or is combined with another activity, it is advisable to conduct a separate tax analysis before changing the accounting procedure.
Frequently Asked Questions
Can separate accounting be discontinued immediately after the contract is terminated? — Not automatically. It must first be determined whether any other categories provided for by the Tax Code remain for which items must be accounted for separately.
Does it matter that the activity is now conducted under a licence? — Yes, but a change in the legal basis alone is insufficient. The actual transactions and the existence of special taxation conditions for the relevant items or types of activities are important.
Who determines the method for allocating common expenses? — The taxpayer establishes it independently and sets it out in the tax accounting policy. The method must allow expenses to be reasonably allocated between the separate categories and other activities.
Does the tax accounting policy need to be amended? — If the transition changes the composition of the separate categories, registers, or the method for allocating common income and expenses, the relevant provisions of the accounting policy should be updated.
Can the indicators for licensed and other activities be combined? — Only if the Code does not require separate accounting for them. Where such a requirement applies, combining items for the calculation of tax liabilities is not permitted.