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:
On 29 October 2022, the Upper House of the Polish Parliament adopted a resolution on modifying the Act amending the Act on counteracting excessive payment delays in commercial transactions and the Act on public finances.
The goal thereof is to clarify the existing provisions, simplify the reporting obligations, and improve efficiency of proceedings on excessive delays in payments. The Act, inter alia, extends the deadline for submitting reports on payment practices from 31 January to 30 April.
The amendments introduced by the Senate are mainly of legislative and ordering character.
The Act is now to be re-assessed by the Sejm.
As per the applicable rules, the essential part of the new provisions will enter into force 14 days after promulgation.
On 25 October 2022, the Council of Ministers passed a draft bill amending the Act on Excise Duty and certain other acts.
The key assumption thereof is to extend the existing period of excise duty exemption for passenger vehicles utilizing an external source of electricity, with engine cubic capacity not exceeding 2000 cm³ (commonly referred to as plug-in electric vehicles) until 31 December 2029 and to provide a raft of technical changes.
The act is now to be submitted before the Sejm.
Its essential provisions are to enter into force on 1 January 2023.
On 24 October 2022, a clearance opinion dated 6 October 2022 (case file DKP3.8082.7.2022) was published. The opinion relates to exchanging loans given by shareholders for the Company’s equity. The goal of the transaction is to create share premium which will be then included in the supplementary capital. The funds allocated to the supplementary capital will be used to cover negative equity and losses incurred in the previous years. Furthermore, the debt/equity swap transaction is to decrease the Company’s liabilities, resulting in improved balance (i.e., debt to equity ratio).
According to the Head of the National Revenue Administration, the above-described activities can bring a tax benefit in the form of reduced capital duty and corporate income tax. This, however, is not the primary or one of the primary purposes behind performing them, nor does it go against the subject or purpose of tax law or its provision, and the action described the applicant will not be deemed of artificial character.
Consequently, Article 119(1) of the Tax Code finds no application.
On 25 October 2022, the Government promulgated a draft bill on an ICT system for processing certain types of contracts.
The key functionality of the new system is that employers and employees can enter into and store contracts online, using a trusted signature. It is also to facilitate the correct calculation and payment of taxes and social security contributions.
The bill is now to be submitted before the Sejm.
The majority of the provisions are to take effect 30 days after publication in the Polish Journal of Laws, while the system itself is to be launched by 2025.
On 20 October 2022, the latest version of the bill amending the Act on the Entrepreneur Duties to Manage Certain Waste and Product Fee, and some other acts, implementing EU’s Directive on single-use plastics, was announced.
The Directive aims at reducing waste from single-use plastics in the environment, inter alia, by stimulating demand for recycled plastics through determining the minimum amount of recycled material in new products, introducing a fee on single-use plastic packaging etc.
As per the applicable rules, the new regulations are to enter into force 14 days after their announcement. It is still unknown, however, when the bill will be submitted before the Sejm. It should be noted that the European Commission called on Member States to implement the provisions of the Directive on single-use plastics without any further delay.
In its ruling dated 21 October 2022 (case file II FSK 537/20), the Supreme Administrative Court held that where the face value of new shares issued as a result of debt/equity swap is lower than the shares’ market value, the issuer should recognize revenue on this account.
According to the Court, if the debt amounted to 100 points and the company issued its shares at a certain equivalent of 80 points, then an effect tantamount to redemption within the meaning of Article 12(1)(3)(a) of the CIT Act was observed in relation to the remaining 20 points. As a result, in the Court’s opinion, a partial redemption of liability actually took place.
In its judgment dated 21 October 2022 (case file II FSK 544/20), the Supreme Administrative Court held that lump-sum income tax collected under Article 30(1)(15) of the PIT Act shall be charged on damages awarded on the basis of non-competition provisions where the entity under an obligation to pay is a company in which the State Treasury (or local government unit) has - whether directly or indirectly - the majority of votes at the meeting of shareholders, understood as the company’s body and not the actual event. According to the Court, in this case it means the majority of votes in relation to the total number of votes attached to all rights, and not only in relation to the rights of the entities present at a given meeting.
In its ruling dated 19 October 2022 (case file II FSK 572/22), the Supreme Administrative Court pronounced itself in the case of a company planning to organize a series of team-building events for employees and associates. The company wanted to check whether it can deduct the actual costs related to event organization and participation of both employees and associates, meeting in mixed groups. According to the Court, staff entertainment expenses related to participation in team-building meetings of natural persons who are not employed by the company and provide services as part of their business activity (under B2B cooperation contracts) cannot be considered as tax-deductible, due to the fact that the company cooperate with these individuals as equal partners.