The choice of a tax method for carrying foreign exchange differences

Corporate Income Tax (CIT) payers and Personal Income Tax (PIT) payers presenting accounts can choose a method of carrying foreign exchange differences referred to in Articles. 9b Paragraph. 1 Point 2 of the Law on CIT and Art. 14b. 2 of the PIT. The adoption of this method is possible under certain conditions.

First of all, the choice should be notified in writing to the correct tax office by the end of the first month of the fiscal year, which comes into effect (in the case of taxpayer’s start-ups – within 30 days from the date of its commencement). If the unit of on-going operations needs to start using the balance sheet method, accounting for exchange differences from 01 January 2014, they shall notify in writing to the tax office by 31 January 2014.

Moreover, in the application of the method sheet drawn up by the taxpayer, financial statement must be audited by authorised entities for their research. At this point the fixed exchange rate differences in the accounts in accordance with the provisions of the Accounting Act will also taken into account for tax purposes. The introduction of the obligation to verify the financial statements by the auditor is to confirm, among others, regularity of fixed exchange rate differences.

The duration of the balance sheet method cannot be less than three fiscal years. A taxpayer who chooses this method of accounting, for exchange differences from 01 January 2014, and announced in due time the tax office relevant to their choice. This office must then be used at least until the end of 2016, with a potential abandonment taking place only from the 2017 financial statements for all years in which this method is used, must be audited by an auditor.

If you choose the method of establishing the carrying amount of the exchange differences, taxpayers on the first day of the tax year, in which this method was chosen, will include the income or deductible expenses accrued against the exchange rate differences, determined on the basis of the accounting regulations on the last day of the previous fiscal year. From the first day of the tax year in which you chose a method, the rules will apply for determining the differences arising from the Accounting Act.