After a judgment representing a turning point, which related to the tax on acquisition of immovable property, there is another one coming. This one focuses on the application of the frequently discussed stipulation of article 24 paragraph 2 letter zc) of the income tax act (hereinafter only “ITA”).

The above-mentioned stipulation enables considering even costs, for which directly related revenues tax eligible, although they would otherwise be considered tax ineligible according to the ITA. In this connection, the question of how to interpret the term “directly related revenue” frequently arises in practice. While the financial administration has not commented on this issue much yet, professionals tried to seek options for optimising by means of wider interpretation of the law. 

The above-mentioned judgment focuses on depreciation of insured receivables. It examines direct connection between cost on grounds of depreciation of insured receivable and accepted insurance benefit. According to the Supreme Administrative Court, direct relation can be understood to mean sufficiently intensive unmediated logical link between income (revenues) and costs (expenditure).

In the given case, after the insurance benefit was paid, the receivable was correctly depreciated into costs. According to the contractual conditions set, the receivable could under no circumstances be satisfied any more, and there is thus no point in registering it in the accounting any further.

In the assessed matter, a logical and unmediated link exists therefore between the payment of insurance benefit and depreciation of the claim. The originally non-tax cost on grounds of depreciation of receivable could thus considered tax cost, up to the height of the received insurance benefit.

Despite the judgment being related to the version of the act that was applicable until the year 2014, selected arguments of the judgment can be applied in later periods as well. We must not forget, though, that every case has its specifics and pitfalls.

If you work with insurance of receivables and considered depreciation of receivables non-tax cost in the past, we recommend re-examining this evaluation and considering the option of submitting additional tax return. In case of any doubts with the application, we will be happy to help you.