Polish government wants to adopt a draft CIT in Q3

by   CIJ News iDesk III
2022-06-21   17:54

The Polish government plans to adopt a draft amendment to the act on corporate income tax, which provides for the modification and postponement of the entry into force of the provisions on minimum income tax, introducing changes to the structure of this tax and extending the catalog of exemptions, according to the list legislative and program work of the Council of Ministers.

Adoption of the draft amendment to the act on corporate income tax is planned for Q3.

The purpose of the planned amendment is:

1. modification and postponement of the entry into force of the provisions on the minimum income tax

- suspension of the application (exemption) of the provisions of the CIT Act in the period from January 1, 2022 to December 31, 2022 (protection of Polish companies against possible negative consequences of the entry into force of this tax in circumstances where political and economic turmoil affects the global economy and thus on the entities functioning in its space),
- introducing changes to the structure of the tax itself, i.e. in particular:
• increasing the profitability ratio to 2%, while changing the methodology of its calculation (including excluding from tax deductible costs fees for leasing contracts for fixed assets, excluding from revenues the value of trade receivables sold to entities from the factoring industry, excluding the value of excise tax),
• introducing an alternative method of determining the tax base - at the choice of the taxpayer
• expanding the catalog of exemptions from this tax (to include municipal companies, small taxpayers, taxpayers where most of the revenues were generated in connection with the provision of healthcare services, taxpayers whose profitability in one of the last three tax years was above the 2% rate, and bankruptcy or liquidation taxpayers).

2. changing the date of updating individual taxpayer's data

- departure from the quarterly update of data of large taxpayers, in favor of the update carried out once a year (after the change, the update will take place by 30 September, as of the first day of the month preceding the month in which individual taxpayers' data are to be made public - i.e. as of August 1).

3.change of regulations on foreign controlled entities (CFC)

- introduction of regulations eliminating double or multiple taxation of CFCs in the case of cascade dividend payments in holding structures,
- clarification of the prerequisite for the high profitability of the foreign entity in relation to the assets held in the event of a potential sale of assets during the year,
- clarification of the definition of a subsidiary - editorial / supplementary change.

4. amendment of the provisions on taxation with tax on shifted income

- covering with the scope of tax on shifted income only costs classified as tax deductible costs,
- clarification that the related entity for which the costs are incurred has no headquarters or management board in the territory of the Republic of Poland,
- clarification of the condition relating to 50% of revenues obtained by a related entity and the condition relating to the transfer of revenues to another entity (at least 10%),
- simplification of the condition for preferential taxation in the state of the seat, management, registration or location of a related entity (the condition of lower taxation relates directly to the related entity's revenues from a specific receivable, and not to the total activity or income of the related entity),
- Appropriate application of the provisions on tax on transferred income to specific schemes with the participation of tax transparent companies or with foreign entities transferring revenues to other foreign entities benefiting from low taxation.

5.changes in withholding tax (WHT)

- exclusion of the application of certain obligations of broadly understood payers (i.e. both the issuer as the payer sensu stricto, and the entity being the so-called technical payer) with regard to withholding taxation of interest and discount on treasury securities (i.e. treasury bills and bonds),
- elasticity of the structure (extending the time range) of the payer's statement excluding the obligation to apply the mechanism (submitting a statement would not apply this mechanism for the next seven months, and not as at present, only three).

6. changes in the settlement of debt financing costs in tax costs

- clarification of the amount excluded from tax costs. The higher amount (PLN 3,000,000; 30% EBITDA) is excluded.
- the provisions would not be covered by these provisions of debt financing granted for the acquisition or subscription of shares (stocks) or all rights and obligations in entities unrelated to the taxpayer.

7.changing the regulations on the Polish holding company (PSH)

- replacing the definitions of a subsidiary, domestic subsidiary and foreign subsidiary with the definitions of a domestic subsidiary and a foreign subsidiary,
- clarifying the provisions of, inter alia, within 1 year of holding shares (shares) in subsidiaries by the holding company),
- extension of the catalog of legal forms in which a holding company may operate to include a simple joint-stock company,
- granting the right to use by the holding company from CIT exemption of dividends under the Parent Subsidiary Directive,
- making it possible for a domestic subsidiary to benefit from an exemption under the PSH in a special economic zone or the so-called Polish Investment Zone,
- introduction of 100% dividend exemption (currently 95% dividend exemption).

8. amendment of the provisions on lump-sum taxation on company income

- modifications to the method of determining income from expenses not related to business activity in the case of using assets (e.g. passenger cars) for business purposes and other purposes not related to business activities (in the amount of 50% of expenses, depreciation write-offs and write-offs due to permanent loss of value related to the use of assets not used for business purposes will not constitute expenses not related to business activities),
- modifications to the deadline for the taxpayer to submit a notification on the choice of lump-sum taxation on company income (ZAW-RD), before the end of the tax year adopted by the taxpayer (the decision that this notification is submitted by the end of the first tax year in which the taxpayer is to be taxed with a lump sum)
- change in the condition for the expiry of the tax liability due to the so-called initial correction (clarification that this obligation expires in full after at least one full lump sum tax period, i.e. 4 tax years),
- change of the deadline for the payment of the tax due on the income from transformation (clear indication that if the tax on the income from transformation is paid in full, the taxpayer is obliged to pay the tax within the deadline for submitting the CIT-8 tax return for the tax year preceding the first year of lump-sum taxation) ,
- modification of the date of payment of the lump sum on income from distributed profit and income from profit to cover losses (also applies to advances against the expected dividend) and the lump sum on the distributed income from net profit.

In addition, it is planned to change the provision on the deadline for paying contributions for employment and equivalent income, in part financed by the payer, contributions to the Labor Fund, Solidarity Fund and the Guaranteed Employee Benefits Fund, as well as changing the provision on the procedure for refunding tax on revenues from buildings.

Source: ISBnews