KPMG Weekly Tax Review 30 MAY - 6 JUN 2022

It is 6 June 2022. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• Reply to parliamentary inquiry on transfer pricing information
• Protocol amending double taxation treaty between Bailiwick of Guernsey and Poland
• NRA bodies responsible for handling information filed by real estate companies and their partners
• Reduced interest on tax arrears can be applied to tax advances
• Polish Deal passed by the Senate’s Finance Committee
• Exchange rate for joint cost and revenue adjustment
• Third party insurance purchased by the employer: no revenue for employees in business travel abroad

On 30 May 2022, the Minister of Finance replied to a parliamentary inquiry no. 31287 on regulations pertaining to transfer pricing information (TPR-C form). According to the Minister, the TPR-C form may be authenticated by a qualified electronic signature, certified by any EU state-designated entity. Moreover, an individual who has breached the obligation to submit the information, has submitted the information which is not conform to the Local File or against the actual state of affairs, may be subject to fiscal penal liability for a fiscal offense or fiscal misdemeanour under the Fiscal Penal Code, according to the principle of fault and intent of the perpetrators.

On 19 May 2022, a protocol amending the agreement between the Republic of Poland and the States of Guernsey for the avoidance of double taxation with respect to certain income of individuals was signed. The key change brought by the protocol is that, notwithstanding any provisions of the Treaty, a benefit under the Agreement shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purposes of the relevant provisions of the Agreement. The Protocol enters into force at earliest on 1 January 2023.

On 30 May 2022, draft decrees of the Minister of Finance on designating bodies of the National Revenue Administration for the purpose of preforming tasks of the Head of the National Revenue Administration in terms of accepting, handling, and making available information filed by real estate companies and their partners (in line with Article 27(1e) of the CIT Act and Article 45(3f) of the PIT Act) were published on the Government Legislation Centre’s website. In principle, the authority in this regard rests with the head of the tax office competent for a seat of a given entity, determined as at the last day of the real estate company’s tax year. For entities seated outside Poland, the task lies with the Head of the Third Tax Office in Radom. The decrees are expected to enter into force next day after they are announced. It should be kept in mind that the Minister of Finance extended the deadline for submitting information on real estate entities until 30 September 2022. 

In its ruling dated 31 May 2022 (case file II FSK 2589/19), the Supreme Administrative Court held that a reduced rate can be applied to interest on corporate income tax arrears paid voluntarily after the end of the year. The case at hand related to a company which, when settling the tax, realized that the amount of quarterly advances it had paid was too low. Consequently, it made relevant adjustment and paid the outstanding amount, applying reduced default interest. Tax authorities found, however, that the base rate for default interest should be applied instead. Eventually, the court decided that the company had the right to use the reduced interest rate, since such a possibility is denied only to taxpayers submitting adjusting returns once they are served a notice of the intention to initiate an inspection (and if it is not relevant - after its completion) or once the audit activities are finalized. Importantly, in the case at hand, none of the two instances took place. The ruling is of importance to taxpayers, as it opens the pathway for applying reduced interest rate on tax arrears not only to final tax settlements, but to tax advances as well. 

On 1 June 2022, the Senate Committee on Budget and Public Finance examined the bills amending the act on personal income tax and certain other acts, bringing changes to the Polish Deal program. Compared to the initial version thereof, the version passed includes an amendment restoring the relief for single parents in its shape in force before 1 January 2022 and increased the amount of the tax deduction that can be transferred to a public benefit organization in a tax return from 1% to 1.5%. Most likely, the bills are to be debated during the upcoming Sejm sitting held 8-10 June 2022. 

It its ruling dated 25 May 2022 (case file II FSK 2530/19), the supreme administrative court pronounced itself in a case of a company granting its clients discounts documented by a collective corrective invoice issued for VAT invoices recording sales in the period for which the after-sale bonus was granted. The company had doubts as to the exchange rate that should be applied to amounts in foreign currencies. According to the Supreme Administrative Court, for the purposes of correcting both the revenue and the cost in CIT, the amounts expressed in foreign currency in collective corrective invoices issued or received by the company should be converted at the average NBP exchange rate as at the last business day preceding the date of issuing the collective corrective invoice.

In its ruling dated 25 May 2022 (case file II FSK 2542/19), the Supreme Administrative Court pronounced itself in a case of a company entering with an insurance agent into a third-party insurance agreement covering the company’s employees during business travels abroad. According to the Court, insurance policies purchased by the Company fall within the scope of professional and personal injury liability incumbent on employees under Article 120(1) of the Labour Code. Therefore, the insurance policy purchased by the company produces effects primarily favourable to the employer. As a result, in the opinion of the Court, the free-of-charge benefit consisting in covering employees with insurance protection does not generate income on the side of employees, and consequently does not force the company to pay income tax advances.