{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
It is a truism to say that we live in a world where regulations are becoming increasingly complex and the pace of legislative change is sometimes frightening. The R&C industry is no exception. Below is a telegraphic summary of the regulatory challenges that have significantly impacted business in 2021 and which we believe will continue to be of great importance to the industry in the coming years.
Pandemic regulations
While discussing 2021 from the regulatory perspective, it is impossible not to mention the COVID-19 pandemic. The tightening and loosening of restrictions, the setting of rules regarding mandatory quarantine or remote learning had a direct impact on the retail industry, both in terms of the number of customers and available employees. Various types of protective regulations, the popular "shields", on the one hand supported entrepreneurs in the industry, while on the other presented numerous legal or reporting challenges that were not easy to cope with.
Given the dynamics of the situation, it is difficult to predict how further legal solutions in the area of pandemics will evolve. Questions that arise include:
will new pandemic countermeasures (e.g. new shopper limits) be introduced?
will there be an obligation or entitlement to verify the EU COVID certificate for employees or clients?
will effective and reliable legal instruments be made available to employers to enable or mandate the testing of employees' current health status (not only in relation to COVID but also, for example, being under the influence of alcohol or drugs)?
One thing is clear - the financial and organisational burden of actually implementing this type of regulation will once again be severely felt by companies in the retail industry.
Ban on trade on Sundays and public holidays
In force in part from 2018 and to a wider extent from 2020, it has been associated with much controversy from the beginning. The law's numerous exceptions to the trade ban proved to be its main Achilles heel, hence it was only a matter of time before the legislature took action to tighten the trade ban.
18 October 2021, the President of Poland signed an amendment to the Trade Prohibition Act, which came into force on 1 February 2022. The key change from the perspective of the R&C industry concerns the exclusion of postal outlets from the ban. After the amendment, only those establishments whose predominant activity consists in the provision of postal services may benefit from the exemption. The predominant postal activity is evidenced by two circumstances that must be fulfilled jointly:
entry of the relevant PKD as the predominant activity in the REGON register;
40% of a retail outlet's revenue is to come from postal activities.
In addition, retail establishments benefiting from the exemption from the trade ban must keep monthly records of their sales revenue, distinguishing between revenue from exempted activities and revenue from other activities.
It should be remembered that both a violation of the trading ban and a failure to keep records or to keep them in a manner inconsistent with the regulations may be punishable by a fine from PLN 1 000 to PLN 100 000. Meanwhile, malicious or persistent violation of the trading ban may constitute an offence under Article 218a of the Penal Code, punishable by a fine or restriction of liberty for up to 2 years.
Stricter regulation of the e-commerce market
Only a few years ago, e-commerce seemed to be a business and legal Wild West, where loopholes in the law often made it worthwhile - like in classic westerns - to be bold. However, as time passed and problems grew, the regulator's watchful eye did not miss e-commerce either. Nowadays, e-commerce is subject to ever tighter regulation, although still, due to its nature, legal solutions will have a hard time keeping up with the development of this market.
One of the key trends that we believe will continue in the coming years is the strengthening of the legal position of e-consumers. Its expression was, among others, the extension in 2021 of the right to "consumer" withdrawal from a distance contract to individuals conducting business activity. This necessitated changes and updates to the regulations of online shops and model contracts used with this type of customers.
Another topic that has been widely discussed in 2021 is online alcohol trading. The lack of legal regulation dedicated to this activity means that e-commerce companies have to contend with unclear and imprecise regulations on alcohol sales through traditional channels, which are difficult to interpret and apply to e-commerce. This translates into a high level of uncertainty and legal risk of this type of activity.
The problem seems to be recognised by the Ministry of Development, which in 2021 announced that work is underway to define the legal status of online sales of alcoholic beverages. Perhaps 2022 will bring the awaited legal regulation in this area.
Minimum tax
The new levy introduced as part of the Polish Deal, popularly known as the tax on corporations, came into force on 1 January 2022. Contrary to this name and the narrative of the finance ministry, this tax will in practice cover all companies, tax capital groups and factories of foreign entrepreneurs that in the tax year:
will suffer a loss from a source of income other than capital gains, or
will have a share of income from an income source other than capital gains income of not less than 1%,
regardless of the taxpayer's size criterion. Fortunately, the legislator has provided for a catalogue of entities to which the minimum tax will not apply. These are:
start-ups (exemption applies in the year of start-up and in the following two tax years);
financial companies;
entities which obtained revenues lower by at least 30% in comparison with the revenues obtained in the tax year immediately preceding the tax year in question;
entities whose shareholders or members are exclusively individuals and who do not hold shares/units in other entities;
entities in which the majority of operating income in a given tax year was earned in connection with
operation of ships or aircraft in international transport,
the extraction of minerals whose prices depend directly or indirectly on world market quotations,
entities forming part of a group of at least two companies in which one company holds, for the whole of the tax year, directly a 75% interest in the capital for the other companies forming part of the group, if
the companies' tax year covers the same period, and
calculated for the tax year, the share of the total income of the companies in their total revenues is greater than 1%.
The minimum tax rate is 10%, based on the sum of four elements:
4% of the value of income (other than from capital gains); plus
the amount of debt financing costs incurred for related parties exceeding 30% of the taxpayer's so-called EBITDA; plus
the amount of costs of services or intangible rights incurred for related parties exceeding PLN 3 million plus 5% of the so-called EBITDA; plus
the value of deferred income tax arising from the disclosure in tax accounts of unamortised intangible assets to the extent that it results in an increase in gross profit or a decrease in gross loss.
The tax base may be reduced by, among others, the value of donations or R&D reliefs, while the minimum tax itself will be reduced by the amount of CIT due for the same tax year.
From the perspective of the R&C sector, the minimum tax can be particularly acute, since one of the elements used to calculate the tax base is revenue. Neither the size of the taxpayer nor the level of employment is relevant here. Taking into account the fact that companies from the trade sector are characterised by high levels of income combined with low margins, the new tax may turn out to be particularly burdensome for them.
Tax strategy
In 2021, under Article 27c of the CIT Act, an obligation to publish information on the tax strategy pursued was introduced.
This obligation applies to:
individual taxpayers with revenues exceeding €50 million;
tax capital groups (irrespective of the value of revenue and applies to the group as a whole and to all its constituent companies).
The information covering 2020 should be prepared and published by 31 December 2021 on the taxpayer's website. By the same deadline, the head of the relevant tax office should also be informed about the address of the website on which information on the implementation of the tax strategy is published. Failure to fulfil this obligation may result in a fine of up to PLN 250,000.
The information on the tax strategy should include, inter alia:
the procedures and processes in place for managing and ensuring the correct implementation of obligations under tax legislation;
the number of information provided on tax schemes (MDR) by tax;
transactions with related parties exceeding 5% of total assets;
making settlements in countries with harmful tax competition;
planned or undertaken restructuring activities;
filed requests for tax interpretations, binding rate information (WIS) and binding excise information (WIA);
information on voluntary forms of cooperation with KAS authorities.
We point out that the CIT Act does not define what exactly the tax strategy itself is and what specific tax procedures a taxpayer should have. It is certainly worthwhile for them to be appropriately adapted to the specificity of a given taxpayer and to protect persons responsible for tax issues against legal risks, especially in the penal-fiscal area, in which we observe increased activity of KAS authorities from year to year.
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Contact us
Counsel, Compliance Practice Team Leader, Advocate, PwC Poland
Tel: +48 519 505 725
Follow us
