It is 28 February 2022. 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:
- New WHT forms
- Response to a parliamentary inquiry related to the obligation of establishing TP documentation
- Goodwill is not subject to capital duty
- Split Payment to apply for 3 more years
- Entities making in-kind contributions are entitled to tax deduction
- Deduction of payments made to the Individual Pension Security Account on the tax return
New WHT forms
On 21 February 2022, new withholding tax forms, including WH-OSC (declaration on holding documents required under the provisions of tax law to apply preferential taxation rules to payments or subsequent payments made) and WH-WOZ (application for WHT clearance opinion) were made available on the Ministry of Finance’s websites.
Response to a parliamentary inquiry related to the obligation of establishing TP documentation
On 16 February 2022, the Minister of Finance replied to a parliamentary inquiry on the obligation of establishing transfer pricing documentation for financial transactions involving loans. According to the Minister’s reply, while determining whether a controlled transaction involving several loans is covered by the obligation, the principal value of all outstanding (unpaid) loans should be considered. Importantly, only the principal outstanding for the given year must be taken into account. Moreover, the loans should be disclosed in the transfer pricing documentation for each tax year until they are repaid (provided that the threshold of PLN 10,000,000 is exceeded).
Goodwill is not subject to capital duty
On 21 February 2022, a bench of 7 judges of the Polish Supreme Administrative Court passed a resolution (case file III FPS 2/21) acknowledging that goodwill, representing the excess of the price of purchase of an enterprise or an organized part thereof over the fair value of the tangible and intangible assets acquired, does not constitute a property right under Article 1(1)(1)(a)) of the Tax on Civil Law Transactions Act. Consequently, it should not be subject to the capital duty. It should be noted that the SAC’s resolutions have binding power over all administrative courts (meaning provincial administrative courts and the Supreme Administrative Court itself).
Split Payment to apply for 3 more years
The European Commission agreed to extend the application of the split payment mechanism in Poland until 28 February 2025. Given that the legislative proposal was presented by the Commission on 22 February 2022, it is expected that the derogation decision will be adopted by the European Council somewhere in March 2022. However, to ensure the continuity of the application of the split payment mechanism in Poland, the draft implementing decision includes a regulation confirming its earlier application, i.e., from 1 March 2022, in accordance with the derogation request. Consequently, as of 1 March 2022, national regulations on the application of the split payment mechanism will continue to apply and the use of this mechanism under the current rules, with regard to goods and services listed in Annex 15 to the VAT Act, will still be mandatory.
Entities making in-kind contributions are entitled to tax deduction
In its landmark ruling of 16 February 2022 (case file II FSK 1427/19), the Supreme Administrative Court confirmed that a company receiving an in-kind contribution, in the event of a subsequent sale of its object, may recognize the issue value of shares issued against this in-kind contribution as tax-deductible costs. Should the sale concern assets classified as fixed, the cost should be defined as their initial value less any depreciation write-offs.
Deduction of payments made to the Individual Pension Security Account on the tax return
Payments made to the Individual Pension Security Account (IPSA) can be deducted by a taxpayer on their annual tax return. The deduction is available to individuals settling their taxes under general rules, as well as those applying the 19% flat tax rate or a lump-sum tax on recorded revenue. The deduction is capped by the maximum amount of contributions made annually to the IPSA. Payments made to the IPSA in the given calendar year may not exceed the amount corresponding to 1.2 of the projected average monthly remuneration in the national economy for a given year, specified in the Budget Law or the Provisional Budget Law. For 2021, this limit is PLN 6,310.80. Importantly, a higher limit of contributions to IPSA applies to individuals running non-agricultural business activities (e.g., entrepreneurs, artists, or freelancers) In their case, the annual limit of contributions is 1.8 times the forecast average monthly remuneration in the national economy for a given year, i.e., PLN 9,466.20 for 2021.
Read the next episodes of the “Weekly Tax Review”, where, until 2 May 2022, we will explore the key aspects of the 2022 PIT return season.