It is 2 August 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:
- Tax changes brought by the Polish Deal put out to consultation
- Posting of the redeemed part of the PDF subsidy subject to tax waiver
- Opinions issued by the Anti-Tax Avoidance Council on 16 June 2021
- General partnerships to keep the CIT payer status until liquidation or de-registration
- Cross-ministry team to establish the premises for developing provisions on Polish REITs
- Statutory minimum wage in 2022
- E-voluntary disclosure disabled for 8 years
Tax changes brought by the Polish Deal put out to consultation
On 26 July 2021, a draft bill containing a suite of tax changes under the Polish Deal program, was published on the Government Legislation Centre’s website. The bill provides a raft of amendments to the Polish tax regulatory framework. The key measures include increasing income tax-free allowance to PLN 30 thousand, raising the threshold for entering the higher income tax bracket to PLN 120 thousand, eliminating deductibility of health insurance premiums and changes relating to health insurance premium accounting basis for individuals conducting business activity. The bill is also to impact corporate taxation by bringing amendments to the provisions on tax depreciation of private property recognized as the company's assets. It is also to significantly influence the real estate market, through excluding write-offs on residential buildings and premises from tax-deductible costs as well as introducing lump-sum tax on recorded revenue as the sole form of taxation of income from rental and lease outside of business activity (private tenancy). The draft bill provides for a number of new tax reliefs, including innovation-targeted reliefs, a consolidation relief as well as an IPO relief for companies entering stock exchange and their investors. Currently, the draft is subject to public consultation. The essential part of the amendments brought by the bill is planned to enter into force on 1 January 2022.
Posting of the redeemed part of the PDF subsidy subject to tax waiver
The Ministry of Finance issued a statement explaining how to post the redeemed part of the Polish Development Fund-granted subsidy subject to tax waiver. According to the Ministry’s statement, the subsidy meets the definition of liabilities set forth by Article 3(1)(20) of the Polish Accounting Act. As of the day of its inception, the liability should be entered into the books as a liability towards PDF arising from being granted a financial subsidy, in the amount to be paid on the date the business operation (cash inflow) takes place, based on the bank statement. For redeemed amounts of the subsidy received, this part of the liability should be reduced in the books against respective operating income, based on an appropriate accounting document, on the date the business operation takes place, in accordance with the terms and conditions of granting such financing.
Opinions issued by the Anti-Tax Avoidance Council on 16 June 2021
On 23 July 2021, two opinions (resolution no 2/2021 and 3/2021) issued by the Anti-Avoidance Tax Council on 16 June 2021 were published. The opinions related to an entity, which in 2015 entered into a loan agreement with a limited joint-stock partnership and, on the same day, signed a datio in solutum agreement with that partnership. Next, in June 2016, the entity merged with a joint-stock company. The entity also had an individual ruling confirming its position, according to which the datio in solutum agreement constitutes a contract for pecuniary interest, and as a result of its performance, instead of the funds under the loan contract, the taxpayer will receive the ownership of the enterprise from the lender. However, the effects of the acquisition of the enterprise will be the same as in the case of its purchase, therefore the value of the loan should be treated as the purchase price. Based on the anti-avoidance provisions, however, the head of the National Revenue Administration issued a decision, according to which the transactions concluded between the Entity and its personally and equity-linked entities led to emergence of a tax benefit consisting in making it possible to deduct write-offs on the artificially created goodwill. The Council assessed the above-specified activities as performed in an artificial manner, with the main purpose of obtaining a tax benefit, which goes against the object and purpose of the tax act provisions. This means that the resulting settlements should be made based on the tax avoidance clause.
General partnerships to keep the CIT payer status until liquidation or de-registration
In reply to a press inquiry, the Ministry of Finance confirmed that a general partnership covered by the CIT scheme will remain a CIT payer until the day it is liquidated or de-registered. According to the regulations applicable from 1 January 2021, general partnerships partnered not only by natural persons are obliged to pay CIT. General partnerships willing to opt out from the CIT scheme must submit to the tax office an information on the taxpayers who have, directly or indirectly, the right to participate in the partnership's profit or update information on changes in the composition of their partners within 14 days from the day such changes are made. Failure to comply means that the partnership becomes a CIT payer by operation of law. Covering by the CIT regime was not to apply to partnerships of natural persons. However, the position of the Ministry of Finance indicates that a general partnership that does not submit information about its partners and, consequently, becomes a CIT taxpayer, will remain covered by the CIT scheme until the end of its existence, even if the composition of partners changes during its operation to include solely natural persons. Consequently, the only solution for partners willing to avoid double taxation of income earned from the partnership’s activities will be to liquidate such a partnership.
Cross-ministry team to establish the premises for developing provisions on Polish REITs
On 26 July 2021, a cross-ministry works on establishing the premises for developing provisions on Polish REITs began. A REIT (Real Estate Investment Trust) is a listed company or fund that invests in income-producing real estate, collects rents on the properties, and then distributes that income to shareholders. In Poland, they are to be called Real Estate Investing Companies (Polish: Firmy Inwestujące w Nieruchomości - FIN). The team consists of: its Chairman Anna Kornecka and Robert Tomanek - deputy ministers from the Ministry of Economic Development, Labour and Technology as well as Deputy Ministers of Finance, heads of: the National Bank of Poland, Bank Gospodarstwa Krajowego, the Office of Competition and Consumer Protection, the Warsaw Stock Exchange, the Polish Development Fund and the Polish Financial Supervision Authority. At the first meeting, the team discussed the most important problems and strategic issues related to the assumptions of the Polish REIT act. The members of the team are to come forward with their positions within the three following weeks. Specific legal solutions are to be developed afterwards.
Statutory minimum wage in 2022
The Council of Ministers issued a draft decree on the amount of the statutory minimum wage and the minimum hourly rate for 2022. The minimum wage will increase by PLN 200 - from PLN 2.8k to PLN 3k, while the lowest hourly rate for the self-employed and contractors will be raised by PLN 1.30 - from PLN 18.30 to PLN 19.60. It should be kept in mind that the increase in the minimum wage will have a direct impact on many indicators being of importance to employers and businesses. It can also indirectly lead to increase in the average remuneration. The minimum wage affects indicators such as: the limit on the amount of contributions for retirement and disability pension insurance, the standard amount of social security contributions for self-employed and the amount of health insurance contributions. It is also important for posted workers and foreigners employed in Poland.
E-voluntary disclosure disabled for 8 years
According to the latest amendment to the provisions of the Code of Criminal Procedure and the Fiscal Penal Code, which is to enter into force on 5 October this year, for the next eight years it will be impossible to submit a voluntary disclosure in electronic form. This is because the Code of Criminal Procedure is to become amended to allow the possibility of the online submission of the disclosure “in writing” only starting from 1 October 2029. The reasons for such a situation are poorly amended regulations and the lack of synchronization of the entry into force of the regulations on the form of the voluntary disclosure under Article 116 of the Code of Criminal Procedure and Article 16 of the Fiscal Penal Code. Pursuant to Article 116(1)(2) of the Code of Criminal Procedure: "A declaration made electronically is also considered a declaration made in writing". According to Article 113(1) of the Fiscal Penal Code, in the case of voluntary disclosure, Article 116(1)(1) of the Code of Criminal Procedure should apply, which would mean that a voluntary disclosure submitted "in writing" should also cover voluntary disclosures made electronically. The problem is, however, that the amended Article 116(1) of the Code of Criminal Procedure is to enter into force only on 1 October 2029.