Tax Alert: Finalization of works on major changes to income taxes for 2019 – the amending acts signed by the President

Finalization of works on major changes to income taxes

On 13-14 November 2018 the President of Poland signed respectively:

Anna Sińczuk KPMG in Poland

Partner, Tax, Head of Corporate Tax Advisory

KPMG in Poland

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  • the Act amending the Personal Income Tax Act, the Corporate Income Tax Act and several other acts of 23 October 2018 (draft bill no. 2854), and
  • the Act amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Ordinance Act and several other acts of 23 October 2018 (draft bill no. 2860).

Starting from 1 January 2019, the abovementioned acts introduce a number of changes to income taxes presented in detail in our previous Tax Alerts. Below we present the summary of the most important changes.

1) Introduction of taxation of income from unrealized profits (Exit Tax).
2) Introduction of specific rules of taxation of profits from virtual currencies (which in a nutshell will be considered to be capital gains).
3) Introduction of a reduced rate of 9 percent of CIT for taxpayers whose revenues in a given tax year did not exceed the equivalent of EUR 1.2 million and have small taxpayer status (in other amending act the limit for the small taxpayer status is increased from EUR 1.2 million up to EUR 2 million, but this change is pending).
4) Introduction of taxation of income generated by qualified intellectual property rights, such as patents or industrial design protection rights, at a preferential rate of 5 percent (IP Box).
5) Modification of the obligations concerning withholding tax by:

  • changing the definition of the beneficial owner in the CIT Act and introducing the definition of the beneficial owner to the PIT Act.

  • introduction of the new WHT collection procedures according to which, when total amount of payments made to the same taxpayer in a given tax year exceeds PLN 2 million, the tax remitter will be obliged to calculate, collect and pay withholding tax due with respect to the surplus amount based on domestic tax rate indicated in CIT Act (as a rule without the possibility of using the exemption or preferential tax rates resulting from particular provisions of the double tax treaties). Subsequently, it will be possible to submit tax refund application by a taxpayer (or by a tax remitter but only if he incurred the economic burden of WHT).

An exemption from the above rules will be possible upon providing to the tax authority a statement signed by all the members of tax remitter management board concerning fulfilment of the formal requirements and keeping carefulness in verification of the conditions for particular tax preference (under penal liability of the management and consequences in the form of additional tax liability of 10 percent of the payment)

It will also be possible for a taxpayer (in some cases by a tax remitter) to apply for the opinion of the tax authority regarding the right to use an exemption from withholding tax (it concerns only exemptions which are adopted to the CIT Act as a result of the implementation of European Union directives – royalties, interest and dividends).

  • introduction of the possibility to use a copy of the certificate of residence for certain kinds of receivables paid to the same entity do not exceed PLN 10 thousand in a calendar year.

6) Modification of the tax regulations regarding passenger cars by:

  • increasing to PLN 150 thousand the limit of the value of a passenger car for the purposes of deducting depreciation write-offs and insurance costs included in the tax deductible costs, as well as covering leasing fees with this limit (higher limits may apply in the case of electric cars), the limitation will not concern the taxpayers engaged in leasing business.
  • introduction of the limitation of operating expenses of passenger cars to 75 percent of these expenses in the case of using them also for non-business purposes (in order not to apply the limitation it will be necessary to keep similar records as for VAT purposes).

The existing rules will be sustained for the lease contracts concluded before 1 January 2019, unless the lease contracts are amended or renewed after that date.

Please contact us if you would like to obtain more information on the aforementioned changes or discuss their impact on your company.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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