The adoption of a Council Directive (EU) 2022/2523 on December 14, 2022 (hereinafter: "Pillar 2 Directive") by the European Union led to the obligation of implementing EU provisions into the domestic tax and legal order. Consequently, on April 25, 2024, a draft bill was published on the website of the Government Legislation Center, which introduces the principles of a global minimum tax (the so-called "Pillar 2") in Poland.
The date of adoption of the draft Pillar 2 bill is scheduled for the third quarter of 2024. The aforementioned act is planned to enter into force on January 1, 2025. The current wording of the transitional provisions provides for the optional possibility of applying the provisions retroactively, starting from January 1, 2024.
The provisions of Pillar 2 will apply to international and domestic capital groups whose total annual turnover will amount to at least EUR 750 million in at least two out of four tax years preceding a given tax year.
The tax will be payable on the difference between the minimum rate of 15% and the effective tax rate calculated for a given jurisdiction.
For more information regarding mechanisms and entities obligated to calculate the Pillar 2 tax please head toward the article concerning the Polish draft bill of Pillar 2 (both in Polish and English) link.
In this article we would like to mainly indicate potential scope of penalties stemming from lack of fulfilment of obligations resulting from the Pillar 2.
Filar 2 - scope of obligations and potential penalties
Pursuant to Article 46 of Pillar 2 Directive, EU member states should introduce rules on penalties applicable to infringements of the national provisions adopted pursuant to that Directive and shall take all steps necessary to ensure that the penalties are applied. The aforementioned penalties must be effective, proportionate and dissuasive.
In consequence, the Polish legislator proposed amending the Penal Fiscal Code (hereinafter: “PFC”).
Among the obligations stemming from the introduction of global Pillar 2 principles, failure to comply with which may result in a penalty, include (among others) the following actions of taxpayers:
- Failure to keep accounting books or keeping them in a defective manner (i.e. inconsistent with the law) or unreliable (i.e. inconsistent with the actual state of affairs) manner;
- Failure to prepare financial statements or consolidated financial statements, as well as preparing them contrary to the provisions of the domestic tax law and other international standards (e.g. International Accounting Standards);
- Failure to submit or late submission of a declaration including data necessary to calculate individual taxes under the OECD Model Rules or providing untruthful information in the aforementioned declaration;
- Failure to submit or untimely submission of a return on the amount of qualified income (loss) or providing untruthful information in the aforementioned return;
- Failure to provide information about the data of the foreign entity submitting the declaration in conjunction with information about the country in which such entity is located;
- Late payment of the global minimum tax, the qualified domestic minimum top-up tax (hereinafter: “QDMTT”) or the top-up tax of the under-taxed profits.
Taking the above into consideration, not all violations of obligations arising from Pillar 2 may be subject to penalties under the current legislation. For this reason, it was considered that this requires amendment of the Penal Fiscal Code by introducing a new type of actions subject to penal fiscal liability. Newly added Article 56f and Article 80h of the PFC indicates the following acts:
- Failure to submit a so-called "GloBE Information" or failure to submit it in accordance with the electronical template;
- Submitting GloBe Information after the deadline,
- Providing untruthful data about the foreign entity submitting GloBE information in conjunction with information about the country in which such entity is located.
At the same time, in terms of all the above-mentioned actions a so-called “privileged type” of actions was provided for cases of minor importance, punishable by a fine for a fiscal offence.
It should also be noted that the PFC, in distinguishing actions into fiscal crimes and misdemeanours, provides for an appropriate range of penalties for committing them. In this context - depending on the offence or fiscal offence committed in connection with Pillar 2 - the taxpayer will be liable to a fine, restriction of liberty or imprisonment.
Summary
Taking into account the nature of the global minimum tax, a breach of obligations arising from Pillar II can only be considered as a minor importance in rare situations. This conclusion was explicitly expressed in the justification of the draft Pillar II Act.
This means that preparations for the proper fulfilment of the newly imposed obligations should be started in advance in order to correctly and timely calculate and report them in the tax returns and GloBe information.
If you are interested in our support with regards to Pillar 2, please feel free to contact us.
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