Companies engaged in electricity trading are not always able to resell the energy on the market, including due to errors occurring on the part of the transmission system operator. Can the cost of purchasing such energy be treated as a tax-deductible expense?
Taxpayer’s Question Submitted to the Director of the National Revenue Information (KIS)
The above issue (which has been the subject of disputes in practice) was presented to the Director of the National Revenue Information in an application for an individual tax ruling. An energy trading company asked whether, in a situation where part of the purchased megawatt hours could not be resold on the market due to errors by the transmission system operator (for example, resulting from incorrect power allocation or delays in data transfer), the costs of acquiring such unsold energy may be considered tax-deductible expenses.
According to the Company, despite the lack of direct revenue from the sale of that energy, the conditions for recognizing these expenditures as tax-deductible costs are met, as they remain connected to potential taxable revenue. The applicant — a professional energy trading entity — pointed out that electricity is purchased for resale and for generating revenue both on the wholesale market and from final customers.
Response from the Tax Authority
In the tax ruling issued on 4 August 2025 (ref. no. 0114-KDIP2-2.4010.298.2025.1.SJ), the tax authority confirmed that expenses incurred for the purchase of electricity that was not resold and did not generate taxable revenue in the same period may be recognized as tax-deductible costs for income tax purposes. The condition is proper documentation of the reasons for the situation (e.g., relevant correspondence with the transmission system operator), particularly confirming the economic purpose of the company’s actions (efforts aimed at selling the purchased energy) and the occurrence of reasons for the lack of resale that were beyond the taxpayer’s control.
Summary
The cited tax ruling resolves a dispute regarding the recognition of so-called empty trading costs in the energy sector in favor of taxpayers. It confirms the right to recognize the operating loss for income tax purposes, provided that the factual circumstances did not arise due to reasons attributable to the taxpayer and are properly documented.
