It is 12 July 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.
In today's episode:
- Draft general ruling on the definition of uniform controlled transaction put out to tax consultations
- Clearance opinion on changes to ownership structure
- CJEU to assess whether EU MDR rules are in breach of the EU Charter of Fundamental Rights
- National COVID-19 vaccine lottery prizes exempt from income tax
- R&D relief for partners in limited partnerships
- Precedence of business activity over other sources of revenue applicable to real estate sales
Draft general ruling on the definition of uniform controlled transaction put out to tax consultations
The Ministry of Finance announced it has launched tax consultations on the draft general ruling on the definition of uniform controlled transaction. The Polish PIT and CIT Acts lack such a definition, while in the statement of reasons for the draft bill introducing the concept of uniformity it is indicated that the uniform nature of a transaction should be understood as the similarity of the subject of the transaction and other main parameters of the transaction, significant from the point of view of transfer pricing. According to the draft ruling, the notion of uniform controlled transaction should also cover a set of controlled transactions which, for the purpose of determining the value of a controlled transaction, should be aggregated due to their uniform nature.
Clearance opinion on changes to ownership structure
On 24 June 2021, the Ministry of Finance issued a clearance opinion of 25 May 2021 (case file DKP3.8011.31.2020), in which it was confirmed by the Head of the National Revenue Administration that an activity consisting in making an in-kind contribution of all shares of a Polish company to a foreign company by foreign, related, shareholders, in exchange for the company’s shares resulting from increasing the share capital and the possible dividend pay-out does not meet all statutory criteria of tax avoidance. The authority admitted that although in this case attaining a tax benefit would be one of the primary purposes, two other prerequisites for qualifying it as tax evasion are not met. This is because the achieved tax benefit does not go against the object or the purpose of the tax act, or a provision thereof, and the activities performed by the taxpayer are not artificial in nature.
CJEU to assess whether EU MDR rules are in breach of the EU Charter of Fundamental Rights
On 25 June 2021, the French Council of State (the French counterpart of the Polish Supreme Administrative Court) asked CJEU to give a preliminary ruling on whether the provisions requiring legal specialists to inform the tax authorities about tax arrangements made are consistent with the rights guaranteed in the Charter of Fundamental Rights of the EU. Earlier, a similar request was made by the Belgian Association of Tax Lawyers (case file C-694/20), yet up to now, no response has been given by the Advocate-General of CJEU.
National COVID-19 vaccine lottery prizes exempt from income tax
On 2 July 2021, a draft decree on exempting the prizes won in the national COVID-19 lottery from income tax was published on the Government Legislation Centre’s website. Personal income tax will not be collected on awards with a one-off value exceeding PLN 2,280. The new provisions are to enter into force on 14 July 2021 and will relate to prizes distributed from 14 July 2021 to 11 March 2022.
R&D relief for partners in limited partnerships
In response to a press inquiry and a parliamentary inquiry no. 24423, the Ministry of Finance declared that a partner in a limited partnership or a general partnership who used a R&D relief before 2021, but currently does not conduct business activity, will lose the right to carry forward the costs declared in the past. On the other hand, if the partners, despite their right to research and development relief, have not yet made any deductions, they may settle the tax relief in six consecutive tax years, pursuant to Article 26e(8) of the PIT Act. In the case of limited partnerships or general partnerships which became CIT payers in 2021, such right will be taken over from the partners by the partnership itself.
Precedence of business activity over other sources of revenue applicable to real estate sales
In its ruling of 9 June 2021 (case file II FSK 3674/18), the SAC stated that once it is determined that the real estate was sold as part of business activities, the resulting revenue cannot be taxed according to the rules governing sale of goods or rights. Importantly, the Court pointed to the fact, that such an approach is adopted solely to sales of real estate, since only the provisions on such transactions contain the reservation: "provided that the sale does not take place as part of business activities”. The lack of such reservations in other material provisions has led the Court to a conclusion that in other instances (e.g. real estate letting), the principle of precedence of business activity over other sources of revenue finds no application.