There are some revolutionary changes of the corporate and personal income tax law in Poland, which might influence Your business. The President of Poland signed a bill amending the income tax acts. Some regulations are valid as of the beginning of 2019.
The new regulations regard the following issues:
- new thresholds for TP requirement – PLN 10 M for tangible and financial transactions, PLN 2 M for other transactions. The change was aimed at reducing documentary obligations, however, it may involve a documentary obligation for taxpayers who currently do not have such obligation due to revenues or costs below EUR 2 million. According to the regulations being changed, the taxpayer who concludes the above-mentioned types of transactions with the indicated values, are required to prepare local transfer pricing documentation, even if the sum of its revenues or costs does not exceed EUR 2 million;
- no need to show local transactions in TP documentation;
- broadening the scope of associated companies – in order to include personal relations or relations without the economic reason;
- Master File might be in English;
- extension of the deadline for submitting the TP documentation – 9 months after the end of a fiscal year for the Local Documentation, 12 months for the Master File;
- official interest rate for loans to be published or for low value services a fixed mark-up of 5%;
- tax authorities are capable to recharachterise or disregard the controlled transaction;
- 6th method – valuation technics, if the so-far used methods are not feasible to proper value the transfer prices.
IP Box / innovation box
Preferential 5% tax rate on qualified income, to last as long as the intellectual property rights last (for patents up to 20 years). Requirements: R&D works must be performed by the taxpayer and conducted in Poland.
Compared to making expenditures without a deduction for research and development, in the scenario with the use of R&D, it is possible to deduct the R&D costs (so-called “eligible” costs) from the tax base regardless of the fact that these expenditures have already influenced the tax base (they have reduced it) as tax deductible costs. The deduction is made in the settlement for the tax year in which the eligible costs were incurred.
It is therefore an additional tax reduction, more than the normal deduction of costs and is available after the end of the year. The same costs reduce the tax base twice – for the first time in the monthly calculation of the advance payments of tax, the second time in an annual tax return.
Mandatory disclosure rules
A tool to gather info about aggressive tax planning and tax schemes. The authorities want to have info upfront, before the scheme is implemented. As of the beginning of 2019 the cross-border arrangements and domestic arrangements have to be reported. Intermediary (tax adviser, bank employee, attorney, etc.) shall report within 30 days from presenting the scheme to the taxpayer, however if there apply professional secrecy rules, the taxpayer is obliged to inform the tax authorities.
Mandatory disclosure of domestic arrangements shall apply if the revenues, costs or assets of the beneficiary or his related entity exceed EUR 10 M or if the scheme regards assets or rights above EUR 2.5 M and at the same time:
- the main or one of the main benefits that the user expects to achieve in connection with the scheme is a tax advantage (understood very broadly – generally as any reduction in tax liability or delay in its creation), and at least one other condition is fulfilled from the so called generic hallmarks (a broad and imprecise catalog, for example if the documentation or form of activities does not require significant changes depending on the user or if there is a commitment to confidentiality of the manner in which the tax benefit is obtained from the scheme or if the remuneration for the adviser is established as the success fee, etc.), or
- no matter what the main benefit of the scheme is – if it meets at least one condition from the set of conditions
Mandatory disclosure of the cross-border arrangements shall apply if:
- the main or one of the main benefits that the user expects to achieve in connection with the scheme is a tax advantage (understood in the same way as in the domestic arrangements), and additionally at least one other condition is fulfilled from the so called generic hallmarks (the catalog of these conditions is slightly narrower than in the domestic arrangements), or
- no matter what the main benefit of the scheme is – if it meets at least one condition from the set of conditions, for example:
a) there are cross-border payments, classified as the revenue earning costs, to related entities located in tax havens,
b) the same income or assets are subject to the methods to avoid double taxation in more than one country,
c) there is an unclear structure of legal ownership or it is difficult to determine the actual beneficiary,
d) rights to intangible assets which are difficult to valuate are transferred.
Poland and other EU member states must introduce the Anti Tax Avoidance Directive. If a taxpayer moves assets or business (part of business) abroad (between head office and permanent establishments), he has to pay the tax on the unrealized gain associated with the assets. Hipothetical gain is subject to 19% exit tax rate. More about the exit tax.
At the moment if the taxpayer has the necessary documents (such as the certificate of residence), the lower tax rate of Parent Subsidiary Directive or Double Tax Treaties can be applied. New regulation:
- for payments below PLN 2 M to one taxpayer (non-resident) in one tax year the current model may be applied;
- for payments above PLN 2 M to one taxpayer (non-resident) in one tax year, the domestic tax rate should be applied (19% for dividends, 20% for interests, royalties and intangible services), once tax is paid there is a possibility to apply for a refund.
Possibilities to have an exemption from the model– issuance of a statement from the tax remitter that all the conditions are met or applying for an opinion from the tax authorities, that an exemption from the model may be applied.
Notional interest deduction
Possibility of a new category of tax deductible costs: the interest on contributions paid to equity of a Polish company or financing the taxpayer with the retained profits. The interest rate is based on the interest rate published by the National Bank of Poland (currently 1,5%) increased by an additional 1%.
Limitation of tax deductible costs on car fleets
- introduction of a PLN 150 000 limitation to both leasing and depreciation – the leasing installments exceeding this threshold for non-electric vehicles are non-deductible. Binding for contracts signed after implementation of this regulation.
- introduction of a 75% limitation of the tax deductible costs for mixed use vehicles (business and private) – with regard to the car usage costs (fuel and other expenses).
- introduction of a 20% limitation of the tax deductible costs for the use of private vehicles in the business – with regard to the car usage costs (fuel and other expenses), instead of the mileage allowance limit used so far.