It is 8 March 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.
In today's episode:
- Internet relief
- Limit on tax deductibility of expenses on intangible services not applicable to SEZ
- Extended deadline for submitting CIT-8 returns and transfer pricing reporting
- No extension of the IFT-2R submission deadline
- Deadline for making financial statements for 2020
- Specification of the amount of revenue triggering tax strategy reporting obligation
- Ministry’s explanatory information on due diligence and presumption in tax haven transactions
Deduction on Internet connection expenses, commonly referred to as Internet relief, is one of the most frequently used types of tax relief in Poland. It consists in deducting expenses incurred with respect to Internet access. The amount of the deduction in the given tax year may not exceed PLN 760. Importantly, the deduction may be used only in two consecutive tax years, and only provided that it was not used in the prior years. The deductible amount is verified against a document confirming the expenses incurred, which must contain, in particular: information on the buyer and the seller, the type of service purchased, and the amount paid. Most frequently, these are invoices confirming that the Internet bill was settled.
Limit on tax deductibility of expenses on intangible services not applicable to SEZ
The Polish Supreme Administrative Court (SAC) published a statement of reasons for its judgment of 28 December 2020 (case file II FSK 2568/19) on the way of application of Article 15e of the CIT Act, which sets a cap on the expenses incurred on intangible services purchased from related entities. In the SAC’s assessment, the reference to Article 7(3) of the CIT Act made by the Article in question means that when determining the limit for deductible expenses on intangible services, the revenue and costs giving rise to income which is tax-free or tax-exempt should not be taken into account. This means that income from activities conducted in Special Economic Zones (SEZ) should be disregarded when calculating the limit and the surplus of costs of intangible services purchased from related entities.
Extended deadline for submitting CIT-8 returns and transfer pricing reporting
On 25 February 2021, the Polish Sejm passed an act amending the Act on Excise Duty and certain other acts. It provides for, inter alia, extending the deadline for submitting the annual CIT-8 and CIT-8AB returns and for settling the tax due for 2020 until 30 June 2021. Furthermore, pursuant to the new act, tax authorities are now to accept certificates of residency issued in 2020, provided that they obtained the contractor’s statement that the information contained therein is accurate. Furthermore, pursuant to the act, the deadline for submitting information on transfer pricing (TPR) and a declaration on establishing transfer pricing documentation for 2020 is extended until 31 December 2021. Furthermore, for taxpayers whose financial year does not concur with the calendar year, and for whom the deadline for fulfilling the aforementioned transfer pricing obligations falls between 1 February and 30 June 2021, the time limit is extended until 30 September 2021. In terms of excise duty, the act brings penalties for selling excise goods which have not been properly marked with excise stamps, including a fine amounting to 720 daily rates and imprisonment. The act is now before the Upper House of the Polish Parliament. The new provisions would enter into force on 1 May 2021.
No extension of the IFT-2R submission deadline
The Ministry of Finance reminds that foreign taxpayers who in the last year made payments covered by lump-sum corporate income tax should submit the IFT-2R form to the Tax Office in Lublin by 31 March 2021. This means that the Ministry does not intend to extend the reporting deadline, as it did the previous year. The deadline applies to legal persons, organizational units without legal personality and natural persons for whom the tax year in which payments were made ended on 31 December 2020. At the same time, payers for whom the tax year in which payments were made ended before 31 December 2020 should submit the above information to the competent tax office by the end of the third month after the end of their tax year, pursuant to the provisions in force until 31 December.
Deadline for making financial statements for 2020
The deadline for making financial statements for 2020 falls on 31 March 2021. As communicated by the Ministry of Finance, it is not likely to be extended for all entities. As per the notice issued by the Ministry of Finance, the only considered deadline extension could be granted to non-profit organizations, so that their needs are properly attended to, given that their operations rely mainly on voluntary and social work, yet, not to the detriment of the need for establishing statistical information of key importance for the entire functioning of the State. A draft decree is soon to follow.
Specification of the amount of revenue triggering tax strategy reporting obligation
In response to a press inquiry, the Ministry of Finance explained that the assessment whether the criterion of exceeding the revenue cap of PLN 50 million in the given tax year, giving rise to the obligation of publishing a report on a tax strategy executed in a given tax year, should be made once the year is over. Only then is it possible to determine whether the cap has been exceeded and, in consequence, the reporting obligation is triggered. Such an approach exhibited by the Ministry of Finance may give rise to many doubts and lead to situation where entities publish information on their strategy out of caution, even if eventually they are not legally required to do so. Importantly, failure to establish and publish information on the implemented strategy is punishable with a fine of up to PLN 250 thousand.
Ministry’s explanatory information on due diligence and presumption in tax haven transactions
On 5 March 2021, the Ministry of Finance published draft explanatory notes to provisions on presumption and due diligence in classification of the other party’s settlements in transactions with entities that have their place of residence, registered office or place of management in a territory or country pursuing harmful tax competition practices.
In the authority’s opinion, the requirement to verify the circumstances relevant to the regulations subject to the explanatory information is limited to the taxpayer's obligation to undertake certain activities or measures that may be reasonably required of them, taking into account the character of transactions to be verified. The actions that can be reasonably and justifiably expected of the taxpayer to take in a particular case depends on the facts at hand. This may mean that a taxpayer is not expected to analyse contractual relationships between the other party and its contractors, which are unknown to them. Comments, opinions and remarks to the draft, supported by detailed explanations, can be submitted online until 20 April 2021.