Contractual Penalties, Fines, and Interest in a Sole Proprietorship in Poland — What Is Not a Deductible Expense (2026)

Not every expense related to running a business can be put in costs. The income tax (PIT) Act lists categories of costs that are excluded from deductible expenses (non-deductible) — regardless of how closely they are connected to the business.

The key rules concern contractual penalties, fines, traffic tickets, and late-payment interest. These are among the most commonly misbooked expenses in a sole proprietorship (JDG).

What the PIT Act says

Art. 23 sec. 1 of the PIT Act (Dz.U. 2026 poz. 592) lists categories of costs that are not deductible expenses. The most important for entrepreneurs are:

Contractual penalties and compensation (item 19)

Art. 23 sec. 1 item 19 excludes from deductible expenses (KUP) contractual penalties and compensation for defects in delivered goods and services, as well as for delay in remedying them.

But note — not every contractual penalty is automatically non-deductible. The exclusion concerns penalties imposed on the entrepreneur as a service provider — for defects or delay. Contractual penalties received from a client who failed to perform the contract are revenue, while those paid by you for late delivery are non-deductible.

Fines and traffic tickets (item 15)

Art. 23 sec. 1 item 15 excludes from deductible expenses fines and monetary penalties as well as tickets imposed in criminal, fiscal-criminal, administrative proceedings, and in proceedings for petty offences.

This includes:

• traffic tickets (petty offences),
• fines from the tax office (fiscal-criminal),
• penalties from Sanepid, the National Labour Inspectorate (PIP), and occupational health and safety (BHP) (administrative),
• fines from the social insurance (ZUS) institution.

Late-payment interest on budget liabilities (item 18)

Art. 23 sec. 1 item 18 excludes from deductible expenses late-payment interest on budget liabilities, including:

• interest on tax arrears,
• interest on unpaid social insurance (ZUS) contributions.

This is different from bank interest on a business loan — the latter can be a deductible expense (as a financial cost connected with the business).

Donations (item 11)

Art. 23 sec. 1 item 11 excludes from deductible expenses donations, except donations for purposes specified in Art. 23 sec. 1 items 12 and 13 (public-benefit activity and religious worship). More on donations from a business: donation from a sole proprietorship.

Non-deductible table — quick guide

| Expense | Deductible / Non-deductible | Legal basis | |---|---|---| | Contractual penalty paid to a client for delay | Non-deductible | Art. 23 sec. 1 item 19 | | Compensation for delivery defects | Non-deductible | Art. 23 sec. 1 item 19 | | Traffic ticket | Non-deductible | Art. 23 sec. 1 item 15 | | Tax-office fine | Non-deductible | Art. 23 sec. 1 item 15 | | Interest on tax arrears | Non-deductible | Art. 23 sec. 1 item 18 | | Interest on ZUS arrears | Non-deductible | Art. 23 sec. 1 item 18 | | Interest on a business loan | Deductible | Art. 22 sec. 1 (financial cost) | | Contractual penalty received from a client | Revenue | Art. 14 sec. 2 PIT | | Donation | Non-deductible | Art. 23 sec. 1 item 11 |

Most common mistakes

1. Booking a traffic ticket in costs

A traffic ticket is non-deductible regardless of whether the driver was on company business. Art. 23 sec. 1 item 15 is absolute.

2. Treating tax interest like bank interest

Late-payment interest on budget liabilities (taxes, ZUS) is non-deductible (Art. 23 sec. 1 item 18). Interest on a bank loan can be a deductible expense.

3. Including contractual penalties in costs

Contractual penalties paid to a client for defects or delay are expressly non-deductible (Art. 23 sec. 1 item 19).

4. Donations as a marketing cost

Donations are non-deductible (Art. 23 sec. 1 item 11), even if they have a PR character.

FAQ

Is a contractual penalty paid for late delivery a deductible expense?

No. Art. 23 sec. 1 item 19 PIT excludes from deductible expenses contractual penalties and compensation for defects and delay in remedying defects.

Is interest on a business loan a deductible expense?

Yes, interest on a loan taken for the business can be a deductible expense (Art. 22 sec. 1 PIT). These are not budget interest (Art. 23 sec. 1 item 18).

Is a traffic ticket received while driving to a client a deductible expense?

No. A ticket is non-deductible regardless of circumstances. Art. 23 sec. 1 item 15 makes no exceptions for business travel.

Is a donation to a charitable foundation a deductible expense?

No. Donations are excluded from deductible expenses (Art. 23 sec. 1 item 11 PIT). They are, however, deducted from income in the annual PIT under separate rules (up to 6% of income).

Sources

• PIT Act — Art. 23 sec. 1 items 11, 15, 18, 19 (Dz.U. 2026 poz. 592)
• More on costs in a sole proprietorship: Deductible expenses — a complete guide
• More on donations: Donation from a sole proprietorship

Need help with costs?

Oxyok accounts for sole proprietorships with AI and human review — from PLN 49 + VAT per month. We help book expenses correctly and avoid non-deductible costs.

Write to Paweł or see Oxyok accounting.

Note: Contractual penalties, fines, and budget interest are excluded from deductible expenses regardless of their connection to the business. Bank interest can be a deductible expense — that is a different provision.