It is 7 March 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:
- Tax preferences to support Ukraine
- Joint statement of EU Members on the proposal for a directive as regards corporate sustainability reporting
- Assessment of the purpose of initiating penal fiscal proceedings to cover cases before the SAC’s resolution
- Tax on notional interest in line with EU law
- Answers to FAQ on CbC reporting published by the Ministry of Finance
- Internet connection relief
Tax preferences to support Ukraine
On 3 March 2022, the Ministry of Finance announced new tax preferences aimed at those supporting individuals affected by the crisis in Ukraine. The proposed solutions include, inter alia exempting aid beneficiaries from income tax and inheritance and donation tax as well as the possibility to deduct expenses incurred for the production or the purchase price of goods and rights that are the subject of a donation intended for counteracting the effects of the armed conflict in the territory of Ukraine, made in the period from 24 February to 31 December 2022 to non-governmental organizations (including Ukrainian ones), local government units, Governmental Agency for Strategic Reserves, and entities providing healthcare and emergency medical services in Poland and Ukraine.
Joint statement of EU Members on the proposal for a directive as regards corporate sustainability reporting
On 24 February 2022, the EU Competitiveness Council (COMPET) presented a general approach to the European Commission proposal for a corporate sustainability reporting directive. The goal thereof is to establish a common European framework for reporting and its simplified version for smaller entities. It was also proposed to extend the deadline for directive transposition by Member States to 18 months and implement the new rules in three stages, with reporting deadlines relating to financial years starting after 1 January 2024, 2025, and 2026, accordingly.
Assessment of the purpose of initiating penal fiscal proceedings to cover cases before the SAC’s resolution
In its ruling of 3 February 2022 (case file I SA/Łd 530/20), the Regional Administrative Court in Łódź held that the SAC’s resolution of 24 May 2021 (case file I FPS 1/21), providing that administrative courts are entitled to assess whether the initiation of penal fiscal proceedings aims at suspending the limitation period for the tax liability, shall apply also to decisions issued prior to its adoption. According to the RAC, since the penal fiscal proceedings were initiated shortly before the expiry of the limitation period, the tax authority should have demonstrated what activities had been performed in the proceedings and which circumstances would indicate that the initiation of fiscal penal proceedings had not for the sole purpose suspending the limitation period for a tax liability.
Tax on notional interest in line with EU law
In its ruling of 24 February 2022 (case file C-257/20), CJEU confirmed that tax authorities may claim withholding tax on notional interest on an interest-free loan. They may also determine the amount thereof on an arm’s length basis. The case at hand related to a company that was granted an interest-free loan by its shareholder established in Luxembourg. A tax inspection demonstrated that the loan had not been converted into capital and the borrower had neither repaid that loan nor paid interest. Consequently, the company was called on to pay the withholding tax on the interest due. The tax authority established that the market interest rate was to be applied to that loan. The CJEU stated that provisions formulated in such a way apply in the same way to all interest-free loans, whether or not they involve non-resident companies and do not entail any restriction on the free movement of capital principle.
Answers to FAQ on CbC reporting published by the Ministry of Finance
On 3 March 2022, the Ministry of Finance issued a report providing answers to the most frequently asked questions pertaining to Country by Country (CbC) reporting. The fifth edition supplements the answers provided in the fourth edition of the report (December 2020) and deals with new inquiries made by taxpayers. However, it should be kept in mind that the report cannot be treated as a general tax ruling or official explanations of tax law provisions (tax clarifications) within the meaning of the Polish Tax Code.
Internet connection relief
The relief provides for deduction of expenses incurred in a given tax year related to ensuring Internet connection, regardless of the place and form its actual use (e.g., broadband connection at home or wireless access, including via mobile devices). The taxpayer is entitled to the relief provided that they did not use it in the previous years or declared it for the first time in their 2020 tax return. The relief can be applied only for two subsequent tax years. The relief is capped and the maximum deduction in a tax year cannot exceed PLN 700. Importantly, the cap is set for a single taxpayer (individual), meaning that if the Internet connection expenses are incurred by spouses, they can both use the relief.
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.