The issue of recognizing marketing expenses incurred by car dealers has for years been the subject of disputes between taxpayers and tax authorities. The core controversy concerned whether expenditures made under distributors’ incentive schemes could be classified as tax-deductible costs or whether they should be treated as representation, which is excluded from tax deductibility under Article 16(1)(28) of the CIT Act.
In the rulings challenged before the courts, the Director of the National Tax Information held that expenses connected with participation in such programs were incurred to build the company’s image and therefore had a representative character. As such, in the tax authority’s view, they could not be included in deductible costs.
This approach, however, was not accepted by the administrative courts. Both the Voivodship Administrative Court in Warsaw and, ultimately, the Supreme Administrative Court in its judgment of 17 July 2025 (case no. II FSK 1394/22), confirmed that the expenses incurred by dealers under distributors’ quality bonus programs should be recognized as tax-deductible costs.
The Supreme Administrative Court emphasized that these expenses are directly linked to the taxpayer’s business activity and are incurred with the aim of generating revenue – in particular, obtaining bonuses dependent on the achievement of specific sales or quality standards. The Court highlighted that the decisive factor is the economic purpose and the link between the expense and the taxpayer’s income, not its possible promotional effect.
This ruling is of great importance not only for the automotive industry but also for other sectors where incentive and bonus schemes are used. It reinforces the principle that tax deductibility should be assessed primarily through the prism of the connection between an expense and the taxpayer’s income-generating activities, rather than through a formalistic interpretation of the “representation” concept.