The Polish Ministry of Finance issued a draft bill on 12th 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. After the introduction of the formulated amendments, a company that is expecting a rate that is 50% lower than the rate it would pay in Poland will be considered to be a CFC.
- 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.
The Ministry of Science and Higher Education has published an amended draft bill regarding the R&D tax relief. The bill proposes an increase of current income tax deduction from 50% and 30% to 100% depends on the category of eligible costs and the size of the taxpayer. This means that all taxpayers who benefited from the R & D tax exemption are able to save in the income tax PLN 19 to each PLN 100 of qualified costs from 2018 onwards. R&D Tax Relief will come into force on 1 January 2018.
Under the draft bill, taxpayers having the status of R&D Center will get special treatment. As stated by the proposed rule R&D Center will have the capacity to deduct up to 150% of qualified expenses occurred on R&D. It also includes deterioration of structures and developments, and also obtained expertise, opinions, counseling administrations and their equivalents from companies other than research units.
A draft standard tax audit file rules of amendments to the Tax Ordinance Act has been published on 23rd May 2017. According to the standard tax audit file rules taxpayers-lawful entities, authoritative units, and people who directing benefits of the business activities might transmit their banking data to the tax administration electronically. Those data exchange might be performed daily, before the finish of the following day taking after the day being referred to. Though, the new regulation are not applicable for micro entities and public segment entities so the amendment will initiate a new requirement for large, medium and small entities. It will be recommended that these measures might effective 1st September 2017.
The new legislation regarding the exchange of tax information with other countries was signed by the President on 20 March 2017. The Law provides information on obligations of financial institutions and the automatic exchange of country-by-country (CbC) reports. Entities belonging to groups with a registered office or permanent establishment (PE) in Poland shall provide the group information for the reporting year. The new legislation provides rules requiring disclosure and exchange of information on entities within the group including revenue, realized gain (loss) before tax, income tax paid and payable, penalties, capital, ROE, number of employees and tangible assets other than cash and cash equivalents.
A number of major tax changes have been introduced as of 1 January 2017. The changes are given below:
Personal income tax:
Personal income tax has a major change on the tax-free amount that is based on the tax base. In accordance with the new provision, tax deduction is not possible in case of when a taxable income more than PLN 127000.
Corporate income tax:
- The small corporate taxpayers are subject to 15% CIT instead of the standard rate of 19%. The reduced rate applies also to taxpayers starting their business;
- The investment incentive accessible to small taxpayers as well as established companies, whether business or individual taxpayers will be PLN 215,000 (EUR 50,000). It refers instant depreciation of fixed assets in the classification groups 3 to 8, excluding passenger car.
Transfer pricing documentation:
New regulations on transfer pricing applicable as at 1 January 2017 will lead to the situation where the obligation to formulate transfer pricing documentation will have to be analyzed.
- A new threshold has been introduced for the related party status that associate companies need to hold at least 25% (previously 5%) of equity interest in another enterprise;
- Taxpayers with more than EUR 10 million in revenues or expenses, need to prepare a benchmarking study and have to provide a summary report on transactions with associate enterprises along with a tax return.
- The regulation introduced new requirements for taxpayers. Taxpayers have to file their monthly VAT returns electronically and sign the VAT returns with an e-signature;
- The tax authorities calculates the correct VAT amount and impose an additional VAT sanction corresponding to 30% for the discrepancy. The sanction rate will go up to 100% in certain cases;
- Introduced an additional requirement to a fulfilled VAT refund amount within 25 days;
- The outstanding amounts under other invoices cannot exceed PLN 15,000.
The lower chamber of the parliament (Sejm) has passed the Bill on 10 February 2017 regarding the Exchange of Information in tax matters with other countries. The bill implementing among other measures, Council Directive 2014/107 with regard to the automatic exchange of information in tax matters. After approving by the higher chamber of the parliament (Senat) and signing by the President, the Law will become enter into force 7 days from the publication date in the official journal.
New amendments regarding the corporate income tax and individual income tax acts of Poland have been entered into force on 1st January 2017. In accordance with the new amendments, a 15% reduced corporate income tax rate (previously it was 19% standard rate) is applicable for small taxpayers, which gross sales did not exceed the PLN equivalent of EUR 1,200,000 in the preceding tax year. This preferential tax rate is also available for new taxpayers who have just been opened for business in the first year of operation.