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It is 15 March 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

Certificates of residency in PDF and JPG formats state the seat of taxpayers for tax purposes

In the individual ruling issued on 26 February 2021 (case file 0115-KDIT2-3.4010.209.2017.12.MJ), the Head of the National Revenue Administration Information Centre stated that a certificate of residency provided in PDF or JPG format may be used to confirm the location of a taxpayer’s seat for tax purposes. The ruling concerned a company planning to purchase advertising services from Google and Facebook. The company was provided with certificates of residency issued for those advertisers by the Irish tax authorities in PDF and JPG format. In the company’s opinion, the certificates were in compliance with the Polish law, especially given that certificates of residence have been issued by the Irish tax administration in PDF format and sent via secure electronic channel since 2017. Polish tax authorities, however, have long been of the opinion that the copies of foreign certificates of residency, including those made available on foreign taxpayers’ websites, cannot be treated as valid documents. This opinion continued to be challenged by administrative courts, which ruled that since certificates provided in PDF form are considered valid by the Irish tax authorities, they should also be deemed applicable in the light of the Polish law. This stance was supported by the ruling of the Polish Supreme Administrative Court of 25 August 2020 (case file II FSK 1276/18).

CJEU’s ruling on VAT settlements between the principal establishment and a branch

On 11 March 2021, the Court of Justice of the European Union issued a ruling in a case (C-812/19) confirming that a VAT group Principal establishment situated in one EU country and its branch in another Member State should be regarded as separate taxable persons, since the principal establishment supplies services to the branch and imputes the costs thereof to the branch. The case concerned a Swedish bank, but it may be applied to other companies with a head office in one and a branch in another Member State. The ruling brings about an opportunity to recover the overpaid VAT up to 5 years back. At the same time, however, it may increase the complexity of VAT settlements between head offices and foreign branches and make them subject to tax.

Estonian CIT gap

Applicable as of 1 January 2021, the new tax regime, commonly referred to as Estonian CIT, provides for seven new types of income that can arise in connection with taxation under the new rules. Estonian CIT provisions do not clarify, however, how to calculate the taxable base for income from undisclosed business transactions. Thus, proper calculation of the tax for this type of income becomes impossible, which lead to situation where collection of tax on undisclosed business transactions by the authorities becomes importantly obstructed. According to the explanatory notes published by the Ministry of Finance on 8 December 2020, “for income generated in connection with economic operations undisclosed in the books, the taxable base is equal to the resulting income”. Yet, the lack of a precise provision in this regard means that the declaration of the minister provided therein goes beyond the scope of the statutory authorization, limited to providing explanation. Given the above, the need for amending the existing provisions seems evident. 

Annual tax return and rehabilitation relief

The extensive list of reliefs that may be applied by taxpayers in their 2020 PIT settlements includes a rehabilitation relief. It consists in deducting the taxpayer’s income by the amount spent on physical medicine and rehabilitation purposes along with improving the overall performance in everyday life activities. It may be used by individuals with disabilities or taxpayers who in 2020 supported persons with disabilities. In this context, it should be reminded that there exist two categories of deductions, i.e. capped (deductions are limited to a certain amount, e.g. PLN 2,280 in the case of discount for using a car) and uncapped deductions (covering, inter alia, expenses incurred for the purchase and repair of rehabilitation equipment or adapting apartments to the needs of persons with disabilities).

Deadline for submitting CIT-8 extended

Due to delay in works on the act amending the act on excise duty and certain other acts, stipulating, inter alia, extension of the deadline for the submission of CIT-8, the Minister of Finance has prepared a draft decree in this regard. Under the draft decree, the deadline for submitting CIT-8 shall be postponed from 31 March 2021 to 30 June 2021. The extension shall apply to all taxpayers with the tax year ending from 1 December 2020 to 28 February 2021 and payers of lump-sum on income of companies for whom the first year of applying the lump-sum regime commenced from 1 January 2021 to 1 March 2021. 

Polish-Slovak agreement on automatic exchange of VAT information

On 10 March 2021, Poland and Slovakia signed an agreement on automatic exchange of VAT information. The aim of the deal is to facilitate detection and fight against tax fraud. The agreement is to contribute to the strengthening of administrative cooperation between Poland and Slovakia, mainly by sharing best practices in the area of VAT settlements. It provides for automatic and periodical exchange of information on VAT payers and intra-Community transactions they are part of, which are particularly exposed to the risk of irregularities. It also opens the possibility of using new technologies, such as Big Data and Machine Learning to prevent tax fraud. The agreement is to enter into force on 1 June 2021 and the automated VAT information exchange is to start two months after.