Every entrepreneur at a certain stage of his business is looking for ways to invest. One of them is taking a loan to buy equipment, modern technologies or company development. Currently, we have a choice of a number of financial products, including special loans for companies that have more favorable repayment terms or lower interest rates.
However, it cannot be denied that sometimes it is not possible to obtain such a loan – e.g. in a situation where the company is just starting its activity (many banks reserve the possibility of granting company loans only after 6 months from the establishment of the company). In this case, the only solution is to take a private bank loan. Importantly, if we use it to develop our business, its interest can be included in costs just as in the case of loans for “a company”.
Why can we deduct the only interest?
Many entrepreneurs regret the fact that they cannot include the entire loan amount, but only the sum of interest in the costs of doing business.
Meanwhile, it results from the provisions of the PIT Act. It clearly states that the amount of the loan, both at the time of its receipt and reimbursement, does not affect tax revenues or expenses.
Polish law, and more specifically Article 23 para. 1 point 32 of the PIT Act, they precisely determine in what situation we can include interest in costs. This is only possible if interest is paid. If they are accrued or unpaid or will be redeemed by the bank then we cannot include them in operating costs.
Should you know about including an interest in the costs of your business?
It is also very important to document that the money from the bank loan we took was indeed intended for company purposes. The borrower who wants to take advantage of the option of including interest in the costs of running a business, should, therefore, collect all documents, such as confirmation of the transfer of funds to the company’s account or invoices for the purchase of equipment, devices or tools used in the company.
It is also worth mentioning that the interest paid cannot increase investment costs. So, if the funds from the loan are used, for example, to modernize the company’s headquarters, and thus increase its value, we must settle using depreciation charges.
To sum up, if you run a business and decide on a bank loan that you intend to spend on buying property for the company or investment, take the opportunity that Polish law gives you. By including interest in the costs of your business, repayment will be much easier.