The most important changes in the corporate income tax
Last updated: 04.08.2021
The modifications are aimed at extending the scope of application of this solution by taxpayers and making it easier. The proposed changes include:
The planned assumptions include:
There are plans for a comprehensive system of tax reliefs that are designed to work together. The package of incentives for entrepreneurs is to include: R&D relief, IP Box, prototype relief, relief for industrial robotization and support of innovative employees.
The scope of the “pay and refund” mechanism is to be narrowed down (including the exclusion of intangible services from the scope of the tax refund mechanism). It is also possible to obtain an opinion "on the application of preferences" also for the purposes of not collecting the tax or applying a lower rate in accordance with the DTT. The changes also apply to the payer’s declaration for the purposes of applying “relief at source” and the definition of Beneficial Owner.
The draft amendment concerns the provision of Article 15c (14) of the CIT Act and indicates that the taxpayer may include as tax deductible costs the excess of debt financing costs within the limit set by the value of 30% of the EBITDA obtained in the tax year or a maximum of PLN 3 million. He may not, however, combine the two limits and apply them simultaneously.
a. changes in the provisions relating to the Controlled Foreign Company (CFC)
The prerequisites for a Controlled Foreign Company (CFC) have been clarified by indicating that a CFC is also an entity in which the Polish taxpayer holds, independently or jointly with related entities or other taxpayers having their place of residence or registered office or management board in the territory of Poland, directly or indirectly more than 50% of the share capital or more than 50% of the voting rights in the management of the entity.
The catalogue of passive revenues was also extended to include intangible services, such as consulting, accounting and market research services. Exceeding the threshold of 33% of these revenues constitutes a CFC.
The so-called “shell companies” having very large assets, but not generating income or generating it to a very small extent, have been added to the catalogue of entities forming a CFC.
b. introducing a new concept of the so-called income shifting into taxation
Hindering the transfer of revenues to tax havens by curtailing the practice of establishing companies abroad (e.g. in Cyprus) to which non-taxed income is transferred from Poland. Due to this change, funds sent to shell companies are to be taxed in Poland.
c. introduction of regulations limiting the generation of artificial tax-deductible costs in the form of the so-called “hidden dividend” payment
It is planned to introduce new regulations limiting the generation of artificial tax-deductible costs in the form of the payment of the so-called "hidden dividend". If it is found that the paid benefit is a hidden dividend, the value of this benefit will not constitute a tax-deductible cost for the taxpayer.
d. changes in regulations regarding the reorganization of entities, including those of a cross-border nature
The draft provides for new regulations regarding the reorganization of entities (as part of an exchange of shares, merger, division, in-kind contribution), including those of a cross-border nature, by sealing the existing regulations, i.e. ensuring tax neutrality of restructuring in the event of continuing the valuation of the restructured assets, and in the case of shares (stocks) - ensuring this neutrality for the first share exchange, merger or division.
As part of the Capital Repatriation Program, the Ministry of Finance proposes to implement the Voluntary Disclosure Program in Poland - a program of bringing funds to the country that have been siphoned off by companies applying a risky tax policy.
The so-called transitional lump sum is to be a tool for the repatriation of capital to Poland. A taxpayer who discloses his risky practice to tax authorities will be able to tax the previously undisclosed income or capital with a low-rate flat-rate tax (8% transitional lump sum on income or payment of 2% tax on the value of assets unknown to the tax authorities). The income declared in this way will be exempt from additional taxation and from possible interest. The program can only be used once.
The program will not cover the effects of crimes (including fiscal crimes). Matters related to VAT will also be excluded. It will only apply to income taxes. It concerns, among others, undisclosed income, e.g. from holding shares in foreign companies, from financial instruments or real estate.
Excluding depreciation write-offs for buildings and residential premises from tax costs. The possibility of including as tax costs depreciation write-offs in real estate companies is to be limited to the value of depreciation made in accordance with the accounting regulations and regulations applying to the financial result in a given year.
Clarification of the criterion of having a management board in the territory of Poland in relation to taxpayers not established in the territory of the Republic of Poland (presumption of tax residence in Poland).
Companies planning to go public will be able to take advantage of the new tax relief. The relief will cover the costs of preparation, transformation of the organization, preparation of the offer, marketing activities, preparation of the prospectus, as well as notary, court, fiscal and stock exchange fees. Such expenses can be qualified as tax deductible costs in the amount of 150%.
In the case of advisory, legal and financial services that are directly related to the issue, the deduction will amount to a maximum of 50% of expenses (up to PLN 50,000 excluding VAT).
Introducing provisions encouraging CIT taxpayers to acquire shares or stocks in other companies. The relief consists in the possibility of deducting from the tax base an additional amount of costs incurred in connection with the acquisition of shares or stocks in an unrelated company up to the amount not exceeding the income obtained by the acquiring company in the tax year, but not more than PLN 250,000.
The dividend received by PHC from its subsidiary is to be 95% tax exempt. The tax will only be charged on 5% of the value of the dividend paid. The aim is to encourage investors from outside the EU to invest in Poland. Companies from the European Union are also to benefit from the change - they will be able to decide whether they will benefit from a full tax exemption after two years of share ownership, or from 95% after just one year.
Additionally, full CIT exemption of profits from the sale of shares / stocks in subsidiaries is expected. Currently, if a company decides to sell its subsidiary, it pays 19% of CIT on the sale of shares.
The basic condition for benefiting from the above exemptions is holding at least 10% of shares or stocks in a subsidiary for a minimum of 1 year by the holding company.