Polski
On 25th October 2022 a legal act amending the Corporate Income Tax Act and certain other legal acts providing for further tax changes, mostly concerning corporate income tax (CIT)was published in the Polish Journal of Laws.
I. Changes in the CIT Act
The changes relate to the structural elements of minimum tax, specifically by:
- increasing the profitability ratio to 2%, while changing the methodology for its calculation (including the extension of exemptions that allow to increase effective profitability and avoid the minimum tax);
- introducing an alternative method of determining the tax base. The taxpayer is to have a choice between determining the tax base with a minimum tax using a basic method (a change from 4% to 1,5% of operating revenues, increased by excessive passive costs, i.e. debt financing and intangible services) and an alternative method (3% of the value of operating revenues). In both cases, the tax rate is to be 10% of the tax base.
- introducing a deduction from the tax base of revenues from SEZ operations and factoring;
- extension of the catalogue of exemptions from this tax. The exemptions are to include municipal companies, small taxpayers, taxpayers where the majority of revenues are generated in connection with the provision of health care services; taxpayers being a party to a cooperation agreement; taxpayers whose profitability in 1 of the last 3 tax years was above a rate of 2%; taxpayers in bankruptcy or liquidation.
The newly adopted law introduces provisions clarifying definition of a subsidiary entity, rules for CFC income determination and the premise of a high profitability of the foreign entity in relation to its assets.
The implemented changes are:
- application of the tax on so-called shifted profits only to expenses that are tax-deductible costs;
- application of the tax on so-called shifted profits only if the related entity, for whose benefit the costs are incurred, does not have its registered office or management in the territory of Poland;
- clarification of the condition of 50% of the revenue received by a related entity and the condition concerning the transfer of revenue to another entity (it appears that at least 10% of the revenue is to be transferred to meet this condition);
- simplification of the condition for preferential taxation in the state of residence, management, registration or location of the related entity (the condition for lower taxation refers to the related entity's income from a specific receivable and not to the related party's entire activity or income);
- application of the tax on so-called shifted profits regulations to certain schemes involving tax transparent companies or with foreign entities transferring income to other foreign entities benefiting from low taxation.
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The amendment enables the modification of the withholding tax collection mechanism in force from 1 January 2019. The structure of the remitter's declaration exempting the pay & refund mechanism became more flexible by extending the time scope. The submission of a declaration allows this mechanism not to apply until the end of the remitter's tax year - including the declarations submitted in 2022. Changes also include the exemption from the application of certain obligations of payers with respect to withholding taxation of interest and discount on certain securities.
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The purpose of the new solution is to clarify interpretation of Article 15c of the CIT Act. This objective is achieved by amending the wording of Article 15c(1) and clarifying the amount to be excluded from the tax costs. A higher amount (amount of PLN 3.000.000; 30% of EBITDA) shall be subject to exclusion.
By means of the amendment the existing law is clarified and improved in a way that allows a larger group of entrepreneurs to benefit from the holding regulations. Therefore, the following solutions are implemented:
- extension of the holding regime also to multi-level structures;
- clarification of the provisions on the determination of the ownership of shares (stocks) in subsidiaries, including the extension of the period of this ownership from one to two years;
- extension of the catalog of legal forms in which a holding company may operate by adding a simple joint-stock company;
- allowing a holding company to benefit from the CIT exemption of dividends resulting from the Parent Subsidiary Directive;
- possibility for a domestic subsidiary entity to benefit from an exemption in a special economic zone (SSE) or the so-called Polish Investment Zone ( PSI);
- introduction of 100% dividend exemption (replacing 95% dividend exemption).
The amendment provides a change to the method of income determination in the case of the use of assets (e.g. passenger cars) for business and other non-business purposes. In such a case 50% of expenses, depreciation and impairment losses related to the use of assets, which are not solely used for business purposes, shall constitute non-business expenses within the meaning of this tax regime and thus, shall increase taxable income.
The deadline for paying the tax is also extended to the end of the third month of the tax year following the year in which the profit was distributed (i.e. a resolution was adopted on the division or coverage of the net financial result or the net profit income was distributed). Compared to previous regulations, they assumed the expiry of the deadline on the 20th day of the seventh month of the tax year in which the resolution was adopted, or on the 20th day of the month following the month in which the income from net profit was distributed.
Moreover, with regard to the condition of expiry of the tax obligation under the so-called preliminary adjustment it has been specified that this obligation expires in full after at least one full lump-sum taxation period, i.e. 4 tax years.
The aim of changes is to:
- increase the materiality thresholds for direct transactions with tax havens, which, if exceeded, raise documenting obligations;
- fully revocate the documenting obligations in indirect transactions with tax havens
The 'hidden dividend' regulation, which was to come into force on 1st January 2023, are fully revoked. Significant doubts in terms of the interplay between the hidden dividend and transfer pricing provisions were cited as the reason for this decision. The demands of organizations indicating the need to limit anti-abuse rules that may apply to similar categories of payments were also accepted.
II. Changes in the Tax Ordinance Act
Clarification of the regulations on the obligation to provide information on agreements with non-residents
Coincidence of the obligation to provide information on agreements with non-residents to the head of the tax office competent for the taxpayer and the obligation to submit information on transfer prices (Article 82 §1c of the Tax Ordinance) is clarified. The former will not apply to entities that are obliged to prepare information on transfer prices with regard to transactions with related entities, not constituting so-called transactions with tax havens.
Digitization of information obligations of notaries related to the events raising a tax liability
The amendment changes the procedure for providing information on legal events that may result in a tax liability, included in notarial deeds, which have so far been submitted by notaries to individual tax authorities in the form of paper excerpts. As a result of the introduced changes, the data will be sent to the Head of National Tax Administration by means of electronic communication using the ICT system for counteracting money laundering and terrorist financing, which has already been used by notaries for several years.
III. Other changes
The amendment also provides for other changes including the procedure for refunding tax on income from buildings or the obligation of the Minister of Finance to make available declaration templates. In addition, the act includes provisions extending the anti-inflationary shield from 31th October (stipulated as a deadline by former provisions) until the end of 2022.
The proposed amendment also provides for changes to the Personal Income Tax Act. These changes are, in general, similar to those in the CIT Act concerning the provisions on foreign controlled entities, withholding tax or the documentation obligation with regard to the transactions with tax havens. The situation is similar in the case of amendments to the Lump-sum Tax Act, where the regulations about the obligation of the Minister of Finance to make declaration templates available are modified.
IV. Summary
Based on the recently adopted amending act we are facing further major tax changes in a short period of time. Back in June, an amendment to the Polish Deal was adopted, which, among other things, reduced the PIT rate from 17% to 12% for taxpayers. Now, the changes in majority relate to the provisions of the CIT Act. Some of the regulations correspond to the postulates of representatives of business organisations raised in the previous months.
The act was published in the Journal of Laws on 25th October 2022 (item 2180).
