The Polish Ministry of Finance issued a draft bill on 12^th July 2017, regarding corporate income tax. The draft bill proposes significant changes and sets new foundations in taxation rules for companies in Poland.

• The bill changes the specification for applying the CFC rule which may widen the scope of foreign subsidiaries that meet CFC criteria. From January 2018, the level of holding for CFC purposes to determine control in a non-resident entity will be increased from the current 25% to 50% as envisaged by the EU anti-tax avoidance directive (ATAD). Similarly, low taxation of a CFC will be defined by an effective tax rate of less than 50% (currently 25% of the nominal tax rate in the CFC country). Also, the criterion of a minimum 50% of the CFC’s income to be derived from passive sources will be aligned with the ATAD and as such, set at 33%. The minimum exemption threshold of EUR 250,000 excluding a foreign entity from the application of the CFC rules will be abolished.
• The bill introduces a new restriction in the thin capitalization rules, which limits the deduction of financing costs to 30% of an adjusted tax base. The restriction also applies to the financing of non-affiliated companies. A safe harbor is proposed for financing costs up to PLN120000 (US $ 32000) yearly. Non-deductible costs can be claimed.
• The draft law basically limits the possibility of tax planning with tax capital groups. Accordance with the new rules, if a tax-capital group breaches a condition under which it was established, it may lose its income status as a common taxpayer from the date of its registration.

It is expected that the new rules will be in force as of 1 January 2018. However, the current rules may only be applied until the end of 2018.