KPMG Weekly Tax Review 26 SEP - 3 OCT 2022

On 28 September 2022, the Minister of Economic Development and Technology published a draft assessment of the functioning of the Act of 5 July 2018 on succession management of a privately owned company and other facilities related to business succession. At the same time, the Minister announced that based on the experience so far works have been launched on a draft act containing a suite of solutions to reduce regulatory obstacles and burdens related to ​​starting, executing, and terminating economic activity, including establishing and carrying out succession management. The solutions worked on include, inter alia, changes to the procedure of extending succession management by court, clarifying provisions on remunerating successor managers and subjecting them to the social security contribution scheme, and increasing the flexibility of provisions on appointing a successor manager after the business owner’s death.

A clearance opinion dated 27 July 2022 (case file DKP3.8011.56.2021) on forming a holding structure out of limited liability companies and a joint-stock company, within which dividend will be distributed, was published on 27 September 2022. The dividends will be exempt from the Polish corporate income tax and will be distributed to support the Owner’s investment activities in one of the limited liability companies, using the profits from the operating activities of the joint-stock company and the Owner's security in connection with the planned listing of this company on the stock exchange. According to the Head of the National Revenue Administration, the above-described activities can bring a tax benefit, which, 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 by the applicant would not be deemed of artificial character. Consequently, Article 119a(1) of the Tax Code finds no application.

On 22 September 2022, a bill amending certain acts to remove unnecessary administrative and legal obstacles was submitted before the Lower House of the Polish Parliament by the Special Committee for Deregulation. The bill provides, inter alia, for amending Article 9(1) of the Inheritance and Donation Tax Act setting forth thresholds above which inheritances and donations become taxable. The existing thresholds have applied since 1 January 2003, which is why committee members decided to update them. As a result, the thresholds have increased almost fourfold. Consequently, net amounts of items and property rights acquired from a single individual, the exceeding of which will result in taxation, will be:

1. PLN 36,120 - if the acquiring individual is classified in tax group 1;
2. PLN 27,090 - if the acquiring individual is classified in tax group 2;
3. PLN 18,060 - if the acquiring individual is classified in tax group 3.

In its ruling dated 27 September 2022 (case file II FSK 199/20), the Supreme Administrative Court stated that redemption of a debt can only take place when such a debt actually exists. In the case at hand, the parties remained in dispute as to the existence of the debt, as it was not clearly specified in what amount and on what terms the debt arose and whether it was due. Therefore, the fact of withdrawal of the claim and resignation from the recovery of the disputed debt, without the debtor recognizing the debt as existing, could not constitute debt redemption. Given that it was impossible to establish whether the debt existed at all, and, moreover, the debt was not considered in bankruptcy proceedings, it cannot be inferred from the mere fact of completing the bankruptcy proceedings that the debt was not recoverable.

In its ruling dated 27 September 2022 (case file II FSK 40/20), the Supreme Administrative Court pronounced itself in the case of an entity which entered into a contract regarding commercial property sales support services with one of the service companies belonging to the same group. The doubt related to the application of the cap on tax-deductible costs of intangible services set by Article 15e(1) of the CIT Act. In the Court’s opinion, sales support services significantly differ in their nature from services listed in Article 15e(1)(1). Even if assumed that sales support services have some common elements with the services listed in Article 15(1)(1), this does not justify the artificial division of the comprehensive service, which does not share any inherent common features with the services listed in the above provision. This is because the purpose of rendering the services presented in the application is to conclude a sales contract. As a result, they are not limited by the tax-deductible cost cap under this provision. 

In its ruling dated 27 September 2022 (case file II FSK 49/20), the Supreme Administrative Court held that employer-incurred costs of work legalization and stay procedures performed for employees from outside the EU shall not be treated as the foreign employees’ revenue. The Court noted that pursuant to the Act on Foreigners it is not the foreigner who should apply for the first-time work permit, but the person entrusting the performance of work, since such a permit is inextricably linked with the location of the job and the indication that the work will be performed. Consequently, the costs incurred by the employer in this regard should not be perceived as the foreigner’s revenue. 

On 29 September 2022, the Lower House of the Polish Parliament passed 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 filing reports on payment practices from 31 January to 30 April this year. The Act is now to be submitted to the Senate. As per the applicable rules, the new provisions will enter into force 14 days after promulgation.