A investment purposes fund is a model for tax accounting of investment expenses by allocating them to revenue costs even before the investment is commenced.
Who may establish a investment purposes fund?
Entities specified in Article 15(1hb) of the CIT Act are entitled to establish a investment purposes fund.
In order to deduct costs prior to the commencement of the investment, the taxpayer must fulfil a number of conditions altogether. The solution may be used by an entity that:
- derives at least 50% of its revenue: from receivables, from interest and benefits from all types of loans, from the interest part of lease instalments, from sureties and guarantees, from copyrights or industrial property rights, including from the sales of such rights, from the sales and exercise of rights from financial instruments, from transactions with related entities within the meaning of Article 11a(1)(4) if no or little economic added value is generated in connection with such transactions;
- employs, on the basis of an employment contract, at least 3 FTEs for at least 300 days in a tax year and, where the tax year is not a period of twelve consecutive calendar months, for at least 82% of the days falling in the tax year, or
- incurs monthly expenditure in an amount of at least three times the average monthly salary in the enterprise sector for the payment of salaries to at least 3 natural persons employed under a contract other than an employment contract.
- does not prepare financial statements in accordance with IAS pursuant to Article 45(1a) and (1b) of the Accounting Act (Article 28j(1)(6) of the CIT Act) during the period of use of the investment purposes fund preference.
Conditions for the establishment of a investment purposes fund
In addition to the conditions set out in the legislation regarding the group of taxpayers that may take advantage of the provisions on an investment fund, other conditions must also be met cumulatively:
- The investment purposes fund may be established from the profit made for the year preceding the tax year.
- The funds paid into the investment account must come from the profit made for the previous tax year and may not come from a loan (credit), grants, subsidies, subsidies or other forms of financial support.
- The funds accumulated in the investment purposes fund must be disbursed for these purposes no later than in the tax year following the year the deduction was made in unless the taxpayer provides the competent head of the tax office with information on planned investments indicating the year the funds were disbursed in.
- The funds for the investment purposes fund must be paid into an account set aside exclusively for this purpose.