KPMG Weekly Tax Review 6 JUN - 13 JUN 2022

It is 13 June 2022. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• Anti-Inflation Shields extended until October
• National Recovery Plan approved by the European Commission
• Withholding tax paid in the US vs Polish income tax
• Amendments to the Polish Labour Code announced
• Polish Deal 2.0 awaits the President’s signature
• Poland's central bank raises reference interest rate
• Spouse of a person running non-agricultural business activity as a VAT payer in joint property sale

On 9 June 2022, the Lower House of the Polish Parliament passed the Act on collaborative funding for business ventures and assistance to borrowers, containing provisions on support for credit takers. Importantly, the Act extends the application of anti-inflation programs until 31 October 2022. The Anti-Inflation Shields, currently set to expire on 31 July, have brought reduced VAT rates on fuels (8 percent instead 23 percent), 5 percent VAT rate on heating and electricity, and a zero VAT rate on gas. The zero VAT rate is also applied to basic foods, fertilizers and selected measures supporting agricultural productions. Reduced excise duty on electricity, exemption from excise duty on electricity sold to households, reductions in excise duty on selected motor fuels, and temporary exemption of fuel sales from retail sales tax will also continue to apply until 31 October 2022. This also applies to reduced excise duty on light fuel oil.

On 1 June 2022, the European Commission gave a positive assessment of the Recovery and Resilience Plan for Poland, an important step towards the EU disbursing funds under the Recovery and Resilience Facility. However, the disbursement of funds is subject to a detailed list of recommendations and conditions. Among others, the Commission expects Poland to subject all civil law contracts, including specific task contracts, to the social security contribution system. The only exception relates to civil law contracts entered into with university students below 26 years of age. The Commission expects Poland to do so no later than until the end of Q1 2023. The milestones set before Poland also include a new tax on individuals registering cars with a petrol or diesel engine and a special fee for owning a petrol or diesel car. 

In its ruling dated 19 May 2022 (case file I SA/Gl 24/22), the Regional Administrative Court in Gliwice held that in situations where a brokerage office does not offer the possibility of providing dividend-paying entities with documents confirming the tax residence of investors, which results in the obligation for these entities to deduct 30 (instead of 15) percent of the US WHT, the taxpayer may deduct the tax paid in the US from the tax due in Poland up to the amount of the Polish tax (19 percent). Consequently, it repealed the individual ruling of the Director of the National Revenue Information Service, where it was stated that the Polish-US double taxation treaty provides for the possibility of deducting the Polish tax only by 15 percent WHT payable on dividends. 

A draft bill amending the Polish Labour Code and certain other acts was published on the Government Legislation Centre’s website. The goal thereof is, inter alia, to supplement the Polish legal framework with regulations set forth by two directives, namely: the Directive on transparent and predictable working conditions in the European Union and the Directive on work-life balance for parents and carers. The bill provides for paid time off from work (2 days or 16 hours in a calendar year) on grounds of force majeure for urgent family reasons in the case of illness or accident making the immediate attendance of the worker indispensable (for which the employee will receive 50% of the remuneration calculated as remuneration for the holiday leave), carers' leave of 5 days in a calendar year for workers in order to provide personal care or support to a relative, or to a person who lives in the same household as the worker, and who is in need of significant care or support for a serious medical reason, or extending parental leave to 41 weeks - in the case of a single child or to 43 weeks - in the case of two children and more. The bill is expected to soon be assessed by the Sejm and enter int force on 1 August 2022 to ensure that the deadline for implementing the two EU directives is kept (1 and 2 August 2022, respectively). 

On 9 June 2022, the Lower House of the Polish Parliament examined the amendments to the act amending the act on personal income tax and certain other acts (implementing the Polish Deal 2.0 program) made by the Senate. Out of 30 amendments proposed by the Senate, the Sejm passed the ones restoring the possibility of joint filing by single parents together with their children, increasing the part of tax transmitted to public benefit organizations from 1 to 1.5 percent, bringing changes to the Penal Fiscal Code, and excluding the possibility of loss and bad-debt carry-forward to income being the accounting basis for annual health care insurance premiums for individuals running non-agricultural business activity. The act now awaits the President’s signature. New provisions are expected to enter into force on 1 July 2022. 

On 8 June 2022, the Monetary Policy Council increased the reference interest rate by 75 basis points to 6.00%. The Lombard loan interest rate was also raised to 6.50% annually. Changes to the reference rate affect other financial parameters, e.g., the amount of interest on tax arrears (from 9 June - 15% annually), the limit of notional costs of external financing and of a reduction in the amount of tax liability in the event of payment of VAT in full from the VAT account earlier than the deadline for paying the tax.

On 3 June 2022, the Supreme Administrative Court (SAC) ruled in the case of a taxpayer who, together with her spouse, purchased a plot of land and took up activities consisting in providing it with utility infrastructure. The taxpayer continued to do so after her husband’s death, but she has not been registered as an active VAT taxpayer. Consequently, tax authorities launched proceedings against her, since - in their opinion - the actions taken by the taxpayer and her husband showed that they intended to carry out sales and generate income on this account in a frequent and organized manner, which is included in the definition of running a business in the light of the provisions of the VAT Act. In the SAC’s opinion, however, tax authorities acted in an unauthorized manner. According to the Court, the authorities should examine whether the taxpayer acted in these activities as a co-owner, who naturally accepts the economic activity conducted by the spouse, or whether it is possible to treat her share and involvement as a form of conducting business activity, so that consequences in terms of tax liability may arise.