KIS interpretation overturned: consortium leader will deduct 100% of investment contribution costs – success for HWW Law Firm

The law firm HWW Hewelt Wojnowski Lindner i Wspólnicy successfully represented a real estate development company in a dispute with the Director of National Tax Information, leading to the revocation of an individual interpretation dated August 18, 2025 (ref. 0114-KDIP2-1.4010.308.2025.4.DK), which unjustifiably restricted the right of the Consortium Leader to account for the full amount of expenses incurred as tax deductible costs. The Provincial Administrative Court in Warsaw fully shared the Company’s position, ruling that the Leader’s individual investment contribution is not subject to proportional distribution under Article 5(2) of the CIT Act.

Genesis of the case – misinterpretation of the NIS

HWW’s client – a company acting as Leader in a consortium formed to implement a construction project (construction of residential buildings with infrastructure) – applied to the Director of the Tax Chamber for an individual interpretation regarding the tax consequences of the consortium agreement under CIT. The structure of the consortium provided for a clear division of tasks: The Partner was responsible for the technical and construction side of the investment, while the Leader (the Company) was responsible for financing the entire project, administrative and legal services and commercialization of the facilities. Profit from the investment was to be shared in the proportion of 66.6% for the Leader and 33.3% for the Partner, while costs – assigned to each participant according to the scope of the tasks assigned to them.

The tax authority found the Company’s position with regard to revenue recognition correct, while it questioned the method of accounting for costs. The KIS director pointed out that:

• 5(1) and (2) of the CIT Law establish uniform and overriding tax accounting rules for the entire joint venture – for both revenues and expenses;
• The profit-sharing ratio (66.6%/33.3%) should be applied to all costs incurred by consortium members, regardless of who actually incurred them and what tasks they perform;
• provisions in the consortium agreement attributing individual costs to the party that incurred them are not relevant for tax purposes.

As a result, the authority argued, the Leader can only recognize the expenses it incurs as deductible expenses to the extent of its share of the profit from the venture (66.6%), not the full amount – despite the fact that only its assets are economically burdened.

Legal Argumentation of HWW Law Firm

On behalf of the Company, the HWW law firm challenged the authority’s position both from the standpoint of regulatory interpretation and in light of the already well-established case law of the administrative courts.

The key argument was the distinction between two categories of costs in the consortium, which the authority completely ignored:

• Individual expenses (investment contribution) – incurred by the Leader in connection with the implementation of task responsibilities (investment financing, purchase of materials, wages of subcontractors, administrative and legal services). These expenses economically and legally burden the Company’s assets only – they do not provide for reimbursement or reinvoicing to the Partner. Article 5(2) of the CIT Law should not be applied to this category of expenses.
• Joint expenses of the Consortium – financed from the profit earned jointly by the consortium members, incurred in the interest of the entire project. Only these costs are subject to pro rata distribution according to profit share.

The firm further demonstrated that Article 5(1) of the CIT Law contains a key proviso: “in the absence of proof to the contrary.” This means that the proportion of profit sharing is only a default rule – if the consortium agreement explicitly regulates the allocation of expenses to individual participants according to the task criterion, the parties can effectively exclude the application of the proportion rule to these expenses. The tax law cannot impose on the participants in a consortium a different method of settlement than the one that embodies their consensual will. The Firm’s position is supported by a rich line of case law of administrative courts, including the Supreme Administrative Court.

Outcome of the proceedings – the WSA fully agreed with the Company

The Provincial Administrative Court in Warsaw revoked the appealed individual interpretation in its entirety, fully sharing the Firm’s arguments. As a result of the ruling, the Director of the NIT will be obliged to reconsider the application, taking into account the court’s legal assessment. Key findings of the judgment:

• Separation of individual expenses: The court confirmed that the expenses incurred by the Leader as its investment contribution to the Project constitute costs solely on its side – they are not subject to pro-rata apportionment according to Article 5(2) of the CIT Law.
• The provision of Article 5(2) of the CIT Law cannot impose settlement rules on consortium participants that are contrary to their consensual will expressed in the contract. The proviso “in the absence of proof to the contrary” opens the way for contractual shaping of cost allocation rules.
• The company may recognize all expenses related to the performance of its scope of work as deductible expenses in full, without applying the profit-sharing ratio.
• The director of the NIS incorrectly equated the principle of proportional distribution of revenue and profit with the principle of proportional distribution of costs, ignoring the fundamental difference between individual expenses and the consortium’s common costs.

The ruling is significant not only for the Company represented by the Firm, but also for all companies serving as Leaders in construction and investment consortia. For years, the tax authorities consistently applied Article 5(2) of the CIT Act as a rigid rule, ordering that the Leader’s costs be accounted for in proportion to its share of the profit – even if economically the costs were charged entirely to its assets. The ruling of the WSA in Warsaw confirms the interpretation direction shaped by the NSA and gives taxpayers a strong argument in disputes with tax authorities.

Case management team

The following were responsible for handling the case on the side of the HWW law firm:

1. Mikolaj Hewelt – Partner, Lawyer, Tax Advisor;
2. Matthew Kowalski – Legal Counsel, Tax Advisor;
3. Piotr Magda – Legal Counsel.