The draft amendment to the CIT Act has been published on the website of the Government Legislation Center – specifying the provisions of the previously commented assumptions:
Below we present to you the important issues that have been clarified in this project (in relation to the assumptions).
“Tax heaven”-related transactions
The draft provides for very important and beneficial solutions for taxpayers:
1. Change of thresholds for documentation purposes
The current documentation thresholds are: PLN 100 thousand for “direct” entities and PLN 500 thousand for “indirect” entities.
It is proposed to introduce the following thresholds:
- transactions with “direct” entities – PLN 200 thousand;
- transactions with “indirect” entities, financial transactions: PLN 2.5 million;
- transactions with “indirect” entities, commodity transactions: PLN 2.5 million;
- transactions with “indirect” entities, other transactions: PLN 500 thousand.
2. Purchase transactions
It is proposed to clarify that the examination of the status of the beneficial owner is to concern only purchase transactions (codification of the current practice of the Ministry and tax authorities).
3. Presumption of Due Diligence – abolition and new regulation
Another provision includes lifting the presumption of having a “tax heaven”-based beneficial owner.
Instead, the documentation obligation will not arise if the recipient of the receivable:
- does not make settlements with a “direct” entity or
- is not related to a “direct” entity of Paradise.
This circumstance may be demonstrated by the counterparty’s statement, unless the taxpayer knew or could have known that it is inconsistent with the factual state.
4. Retroactive application of rules
What is very important, it will be possible to use the above-mentioned retroactive regulations – for transactions started and not completed before January 1, 2021 and transactions concluded after December 31, 2020
Tax on shifted income
As for the details of the proposed solutions, it is worth pointing out that according to the proposed solutions:
- for the purpose of calculating the proportion of 3% (“safe harbor”), the ratio numerator will only include passive costs incurred in favor of related entities to which the provisions on shifted income apply;
- the condition of obtaining at least 50% of revenues will apply to one or more related companies based in Poland;
- the condition for the transfer of revenues will be formulated in such a way that the foreign company is to transfer at least 10% of the payments from the above-mentioned Polish entities further (costs, dividend);
- the condition of lower taxation is to apply not to the overall taxation, but to the taxation of a given receivable, with the Ministry of Finance indicating in its justification that no allowances should be made for the overall activity.
It was specified that the taxpayer will be able to choose the method of calculating the tax:
- the tax base is 4% of revenues (tax rate of 10%) or
- the tax base is 2% of revenues and passive costs (tax rate of 10%).
Simplifying the rules on relief for “bad debts”
It is proposed to repeal the obligation to indicate in the annual tax return the amounts of reductions / increases due to “bad debt relief”.