We would like to inform you that the proposal to the act amending the provisions of the Polish CIT Act has been published on the website of the Government Legislation Center. The project is to be a response to the demands of the business and advisors in terms of changes introduced by the “Polish Deal”. The regulations are to be adopted by the government in the third quarter of this year, although it can be expected that many of them will be applied by the FY 2022.
Below will you find a description of the proposed solutions.
- repeal of the provisions on hidden dividends;
- due to the fact that they are to enter into force from 2023, this most likely means that they will not be applicable at all.
- only tax-deductible costs are to be included in the scope of the tax;
- simplification of the condition for preferential taxation in the state of the seat, management, registration or location of a related entity (the condition of lower taxation relates directly to the related entity’s income from a specific receivable, and not to the total activity or income of the related entity);
- clarification of the condition relating to 50% of income generated by a related entity and the condition relating to the transfer of income to another entity (at least 10%);
- clarification that the tax applies only to foreign entities;
- appropriate application to tax transparent structures.
“Tax heaven”-related transactions
- increase of the documentation thresholds – in case of “direct” transactions (doubling), in case of “indirect” transactions – thresholds in different amounts in relation to specific types of transactions;
- change of the scope of the documentation obligation in “indirect” transactions;
- elimination of the presumption of the beneficial owner ‘s residence in a “tax haven”;
- repelling the presumption that the beneficial owner will reside in a “tax haven” in favor of an exclusion of the documentation obligation in certain cases.
- suspension of the application of the “minimum” CIT for the period of 2022;
- increasing the profitability ratio (up to 2%);
- change of the calculation methodology: incl. exclusion from costs of fees for the lease of fixed assets, exclusion from revenues of the value of trade receivables sold to entities from the factoring industry, exclusion of the value of excise duty;
- introducing an alternative method of determining the tax base;
- extension of the catalogue of exemptions (to include municipal companies, small taxpayers, taxpayers where most of the revenues were generated in connection with the provision of healthcare services, taxpayers whose profitability in 1 of the last 3 tax years was above the 2% rate, and taxpayers in bankruptcy or liquidation).
- extending the validity of the WH-OSC statement from three to seven months;
- exclusion of the application of certain obligations with regard to WHT of interest and discounts on Treasury securities (as bills and bonds).
- clarification that the higher of the two possible amounts (PLN 3 million or 30% of EBITDA) is excluded from tax costs;
- changes in the situation of debt financing granted to acquire or subscribe for shares (stocks) or rights and obligations in entities unrelated to the taxpayer.
Polish holding company (PSH)
- introducing 100% dividend exemption (instead of 95%);
- clarification of the provisions, including in the scope of the definition or the requirement of 1 year of holding shares (stocks) in subsidiaries by a holding company;
- the possibility of applying the PSH regime to a simple joint-stock company;
- granting the right to use by the holding company from the participation exemption from CIT (dividends);
- enabling a domestic subsidiary under the PSH to benefit from an exemption in the SEZ or PSI.
- modification of the method of determining income from non-business related expenses in the case of using assets for “mixed” purposes: 50% of expenses, depreciation and impairment write-offs will not constitute non-business expenses;
- the possibility of submitting a notification on the selection of an “Estonian” CIT by the end of the first tax year in which the taxpayer is to be taxed with this lump sum;
- clarification that “Estonian” CIT also applies to advances for dividend.
- clarification of the issue of submitting ORD-U while submitting TPR information (submitting both for “paradise” transactions);
- controlled foreign companies (CFCs) – elimination of cascade taxation in holding structures, clarifying changes;
- clarification of the provisions on loss settlement by companies forming a tax capital group;
- refund of tax on income from buildings – without the need to issue a decision, when the amount of the refund is beyond doubts;
- amendment to the provision on the deadline for paying contributions for employment and equivalent income, in part financed by the payer, contributions to the Labor Fund, Solidarity Fund and Guaranteed Employee Benefits Fund;
- change of the date of updating individual taxpayer data – departure from the quarterly update of data of large taxpayers in favor of updating once a year.
Please note that we do not yet possess the project itself, but only the assumptions – so the detailed solutions may differ slightly from those indicated above.