It is 22 November 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:
- Act promulgating the Polish Deal signed by the President
- Terms of bank settlements and the ruling on invalidity of a Swiss-franc mortgage agreement
- Panel of 7 SAC judges to decide on subjecting goodwill to tax on civil law transactions
- Tax clarifications concerning capital expenditure provision put out to consultation
- Exit tax payment deadline extended by the Ministry of Finance
- Quarterly excise duty returns applicable as of 25 November 2021
Act promulgating the Polish Deal signed by the President
The President of the Republic of Poland signed the Act amending the Personal Income Tax Act, the Corporate Income Tax Act, and certain other acts, containing an amendment package provided for under the “Polish Deal” government program. The key changes include increasing the personal income tax-free allowance to PLN 30 thousand, raising the threshold for entering the second personal income tax bracket of 32 percent to PLN 120 thousand, eliminating PIT deductibility of health insurance premiums, introducing the “middle-class relief” in PIT, and amending the principles of rental and lease taxation. Tax amendments provided under the Polish Deal introduce new rules for taxing a number of activities and actions, but also a raft of new obligations on the part of taxpayers. CIT payers with the share of income in revenue other than capital gains amounting 1 percent or less or reporting losses in a given tax year will be now covered by a new minimum income tax. Other regulations introduced to secure taxable base in CIT include those pertaining to shifted profits, now subject to a 19-percent flat-rate income tax. The amendments are also to extend the CIT Act with regulations limiting shifting of profits, preventing companies from deducting costs incurred in connection with payments made by the entity related to this company or to the shareholder or partner of this entity, if such costs can be considered as a hidden dividend.
Terms of bank settlements and the ruling on invalidity of a Swiss-franc mortgage agreement
In its ruling of 10 November 2021 (case file III SA/Wa 1234/21), the Provincial Administrative Court confirmed that the reimbursements made to clients by a bank subsequent to the court’s judgment on the invalidity of a Swiss-franc mortgage agreement may be treated as tax-deductible costs. The case at hand related to a bank granting Swiss-franc mortgage loans. The bank recognized the interest, commission, and other fees paid by the mortgagees under the agreement, as well as exchange rate differences, as income for tax purposes. The clients appealed against the mortgage agreements, claiming that they included prohibited clauses. Consequently, the bank had to reimburse them. According to the National Revenue Information Service, as a result of judgments of civil courts, the bank, instead of increasing its costs, should adjust its revenues for the periods in which they were recognized. The problem is, however, that in many cases tax liabilities have already expired. In the ruling discussed, the court supported the position of the bank, stating that, given the circumstances, the bank is in obligation to incur costs, i.e., return any commissions, payments and similar transfers made by clients, given the state of facts surrounding the fact of recognizing the agreement as non-valid. According to the court, from the perspective of the tax law, it is a tax event that is taking place now and has tax consequences at present. Therefore, the reimbursements made may be treated as tax-deductible costs, yet should not be used to adjust income earned in the previous periods. The ruling is not legally binding, meaning that the final decision in the case will be made by the Supreme Administrative Court.
Panel of 7 SAC judges to decide on subjecting goodwill to tax on civil law transactions
By the order of 19 October 2021 (case file III FSK 271/21), the Supreme administrative court referred the case of whether the goodwill constitutes a property right subject to tax on civil law transactions to an extended panel of seven SAC judges. This issue has been long subject of divergent legal interpretations by administrative courts. According to the first approach, the goodwill indeed constitutes a company’s property right and, consequently, it should be subject to a 1 percent tax on civil law transactions. According to the second one, however, the goodwill is but a surplus of the price paid for the enterprise over the market value of its individual components, which does not enjoy a separate legal existence, and therefore does not constitute a property right that could be subject to taxation. The issuance of a resolution on this matter by the seven-judge panel of the Supreme Administrative Court should end disputes between taxpayers and tax authorities regarding the taxation of goodwill with tax on civil law transactions.
Tax clarifications concerning capital expenditure provision put out to consultation
The Ministry of Finance announced that the tax clarifications concerning CIT regulations on fund for capital expenditures, also referred to as capital expenditure provision, had been put out to consultation. The issue relates to the new settlement model for capital expenditure, consisting in entering it into tax-deductible costs even before the investment is launched (“super-depreciation”). The model is available to taxpayers meeting the conditions to apply the Estonian CIT scheme. Eligible entities may create a special capital expenditure account, provided that they choose to settle CIT according to general principles. Write-offs made to the dedicated account increase tax-deductible costs and decrease the taxable income. The accumulated amount will become taxable only if it is not spent on investment purposes in the given deadline or spent in other way. Consequently, the capital expenditure fund allows the company to accumulate untaxed means that can be allocated to investments in the future.
Exit tax payment deadline extended by the Ministry of Finance
On 17 November 2021, a draft decree amending the decree on extending the deadline for the payment by taxpayers of personal income tax due on income from unrealized gains, commonly referred to as the “exit tax”, was published on the Government Legislation Centre’s website. Under the decree, the deadline for paying the exit tax by natural persons is extended to:
- the 7th day of the month following the month in which the taxpayer lost all or part of the asset subject to exit tax, if the loss of all or part of this asset occurred before 1 December 2023 (earlier: 1 December 2021),
- 31 December 2023 (earlier: 31 December 2021), in all other cases.
The deadline extension will apply to tax due on income from unrealized gains recognized in monthly returns submitted for taxable periods from 1 January 2019 to 30 November 2023 (earlier: 30 November 2021).
Quarterly excise duty returns applicable as of 25 November 2021
On 1 July 2021, the provisions introducing quarterly excise duty returns came into force. The deadline for submitting quarterly returns was fixed on the 25th day of the second month after the end of the settled quarter. Since the relevant provisions entered into force on 1 July 2021, the first declaration, covering Q3 2021, should be submitted by 25 November 2021. Pursuant to the explanatory notes made available by the Ministry of Finance, quarterly declarations must be submitted by excise duty payers who do not submit monthly excise declarations for specific activities but are nonetheless taxpayers with regard to products exempt from excise duty or subject to a zero-rate excise duty. The group of such entities includes, inter alia: tax warehouse keepers who have to declare only products that are exempt or subject to a zero rate excise duty, entities that do not keep tax warehouses but perform activities subject to taxation exclusively in the scope of excise duty-exempt excise goods, entities that are taxpayers of excise duty on the consumption of alcoholic beverages for excise duty-exempt purposes, e.g. for the production of vinegar or essential oils, entities that are taxpayers of excise duty on the consumption of energy products, in the case of which the zero rate applies to the production of other products, e.g. the production of paints or varnishes.