In today's episode:
- Tax changes brought about by the Polish Deal
- CJEU: Publication of the judgment in the case C-895/19 on VAT interest in intra-Community acquisitions
- Transfer pricing documentation obligation for preliminary agreements and tax haven transactions
- General ruling on applying income tax regulations to share swaps
- Fast VAT recovery service to get extended
- European Commission disagrees to allow zero VAT rates on books and newspapers
Tax changes brought about by the Polish Deal
On 15 May 2021, Poland's government unveiled the details of the new stimulus plan dubbed the “Polish Deal” and the tax changes it brings about. The tax-free income allowance rate for individuals is to be raised to PLN 30k annually. Moreover, the Program provides for raising the threshold for entering the highest personal income tax bracket of 32% to PLN 120 thousand (currently: PLN 85,528). Simultaneously, health insurance contributions are to become non-deductible, while lump-sum health insurance contributions paid by entities conducting business activity will no longer apply. In principle, the purpose of the amendments is to reduce the tax burden for individuals whose monthly earnings do not exceed around PLN 11 thousand gross and around PLN 6 thousand gross, for employees and individuals running business activity, respectively. At the same time, the tax and health contribution burden is to increase for those who exceed these caps. Other tax changes brought about by the Program include extension of the robotization and R&D reliefs, opening the Estonian CIT scheme for a larger group of entities, PIT incentives for individuals returning to Poland, introducing a new tax relief for entities entering the stock exchange and providing capital groups with the possibility of making joint VAT settlements.
CJEU: Publication of the judgment in the case C-895/19 on VAT interest in intra-Community acquisitions
On 10 May 2021, the operative part of CJEU’s judgment in the case C-895/19 was published in the Official Journal of the European Union. The Court ruled that the Polish regulations, under which default interest in intra-Community acquisition are charged when the taxpayer, through the fault of the supplier, declares VAT on intra-Community acquisition of goods after three months following the month in which the transaction was carried out, are incompatible with EU law. Pursuant to the Polish Tax Code, the taxpayer is entitled to receive interest on the overpayment (in this case being the interest charged under the VAT provisions challenged by CJEU) for the period from the day on which the tax overpayment arose until the day it is refunded, provided that the taxable person has submitted an application for refund of tax overpayment before or within 30 days as of publication of the operative part of CJEU’s judgment in the Official Journal of the European Union (if the application is submitted after this date, the interest is due for the period from the day on which the tax overpayment arose to the 30th day from the date of publication of the operative part of the judgment).
Transfer pricing documentation obligation for preliminary agreements and tax haven transactions
In response to a parliamentary inquiry on the documentation obligation with respect to transfer pricing (case file DCT2.054.1.2021DCT2.054.1.2021), the Ministry of Finance confirmed that preliminary contracts are not subject to the documentation obligation resulting from the Polish provisions on transfer pricing, especially if in the tax year for which the transfer pricing documentation is established no final contracts were concluded. Moreover, for transactions other than controlled transactions where the beneficial owner has their place of residence in a tax haven, the documentation threshold of PLN 500 thousand provided for by Article 11o(1a) of the CIT Act (Article 23za(1a) of the PIT Act) shall be calculated based on the value of a uniform transaction entered into with a single contractor (i.e. transactions entered into with more than one contractor or the values thereof should not be added up).
General ruling on applying income tax regulations to share swaps
On 7 May 2021, the Minister of Finance issued a general ruling on applying income tax regulations to share swaps. The ruling pertains to the provisions of CIT and PIT Acts on share swap transactions and to how they relate to the requirement of acquiring the majority stake in a company as a consequence of performing more than one transaction in a period under 6 months. Doubts persisted as to whether these provisions pertained to transactions entered into by the acquiring company with a single shareholder or with any number of natural or legal persons with whom separate in-kind contribution transactions were concluded. The Minister of Finance ruled that it is correct to apply the said provisions also in situations where the majority of votes in the acquired company is obtained by the acquiring company as a result of the acquisition of shares from a larger number of shareholders of this company, through separate transactions concluded within 6 months.
Fast VAT recovery service to get extended
The Ministry of Finance announced that it is currently working on introducing technical improvements to the fast VAT recovery service. The service is now to incorporate the new ‘auto-refund’ module which is to accelerate the process of handling returns and VAT reimbursements. The new solution is to apply solely to the taxpayers with clear refund situation, who will now be able to receive the amount due within a couple of days. The reimbursement will be made within this deadline, provided that there are no doubts that it is due. A similar mechanism has been already introduced to the Polish PIT scheme a couple of months ago and successfully applied to refunds in PIT for 2020. At present, works are underway to adjust the tool to the VAT scheme requirements, and to implement it later this year.
European Commission disagrees to allow zero VAT rates on books and newspapers
In response to a parliamentary inquiry no. 22774, Deputy Minister of Finance, Jan Sarnowski, announced that Poland received from the European Commission a negative response regarding the application for authorization to introduce, by way of derogation from the applicable EU VAT regulations, a 0% VAT rate on books and newspapers, submitted in October 2020. Furthermore, it was stated that the only possibility of introducing a 0% VAT rate on newspapers and books is the adoption by the EU Council of the European Commission's proposal to reform the EU VAT rate system submitted in 2018, since the amendments to the VAT Directive it would bring would increase the Member States’ freedom of introducing preferential VAT rates.