It is 22 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:
- Decree on extending deadlines for preparing financial statements
- CJEU: Polish tax on retail sales does not infringe EU law
- EU VAT Forum and solutions to VAT double taxation
- New forms for transfer pricing reporting
- APAs issued before 2021 to protect limited partnerships
- Amendments to the decree on the scope of information provided via tax returns and VAT records
- Tax-deductible donations
Decree on extending deadlines for preparing financial statements
On 12 March 2021, a draft decree of the Minister of Finance on extending deadlines for financial reporting, including the deadline for closing the books of accounts and drawing up, signing and approving financial statements, for a limited group of entities, including: non-governmental organizations from the non-profit sector, other organizations conducting public benefit activities, employers' organizations, professional self-governments and chambers of commerce, was published on the Government Legislation Centre’s website. In turn, on 22 March 2021, the Ministry of Finance announced that given the difficulties brought by the COVID-19 pandemic and the requests submitted by the business community, a decision was made to postpone deadlines for preparing financial statements also for other private entities and public finance entities - by three months and one month, respectively.
CJEU: Polish tax on retail sales does not infringe EU law
On 16 March 2021, the Court of Justice of the European Union rendered a judgment in the case C-562/19 P (Commission v Poland) in which it found that the Polish retail sales tax does not infringe EU law. The ruling was issued in relation to the Polish Act on retail sales tax, which introduces a new burden levied on sales revenue (turnover) generated by retailers. Introduction of the new tax was postponed several times, as it was found by the European Commission to be incompatible with the common market regulations. In the Commission's assessment, the measure constituted unauthorized State aid for smaller businesses, less burdened with the retail sales tax. Yet, in its judgment of 16 May 2019, the European General Court annulled the decisions of the Commission, which subsequently turned to CJEU. The retail sales became applicable as of 1 January 2021. In CJEU’s opinion, establishment of a progressive tax on turnover generated by the retail sale of goods would not lead to a selective advantage and thus does not infringe EU State aid regulations. As a consequence, CJEU ruled that the Polish tax on retail sales is compatible with EU law.
EU VAT Forum and solutions to VAT double taxation
The group of experts forming the EU VAT Forum has endorsed a report providing a raft of recommendations on how to efficiently prevent and solve double taxation situations in the EU. One of the solutions proposed is to put in place procedures that would allow for acquiring EU VAT cross-border rulings to establish a uniform interpretation of VAT provisions between Member States. Such rulings could be issued both for the already executed and for the planned transactions. Another double taxation prevention mechanism proposed in the report is SOLVIT, which is a solution-oriented tool designed to solve complaints caused by incorrect application of EU law by a public authority in a cross-border situation. Furthermore, according to the experts, available information on the topic of prevention and solution of VAT double taxation should be regrouped in a single place on the Commission's website, providing for the possibility of Artificial Intelligence tools integration. In the report it was suggested that it would be beneficial to amend the already existing procedures, e.g. through introducing a requirement to reach an agreement within a SOLVIT-like network, as well as adherence to the existing procedures by all Member States. It was also recommended to establish an efficient dispute resolution mechanism supervised by the European Commission and a newly appointed VAT Ombudsman/mediator.
New forms for transfer pricing reporting
On 15 March 2021, the Ministry of Finance presented drafts of the amended TPR-P and TPR-C schemas used to provide information on transfer pricing. The amendments consist, inter alia, in introduction of the requirement to provide detailed information on business restructuring, transactions related to company deeds involving non-incorporated bodies, joint venture agreements or agreements of similar kind, requirement to provide information on transfer price adjustments in transactions outside the reporting obligation under the domestic exemption as well as on the applied profit split method. Moreover, works are underway to enable electronic submission of the amended schemas via e-Deklaracje system. The final versions of the schemas will be made available in the Central Repository for Electronic Documents of ePUAP.
APAs issued before 2021 to protect limited partnerships
In response to a parliamentary inquiry no. 17367, the Ministry of Finance confirmed that a limited partnership, for which an advance pricing agreement was obtained by its partners before 2021 is not bound by a cap on the expenses incurred on intangible services, to the extent set by the ruling. The issue at hand related to the fact that before 2021, APAs were issued for partners in limited partnerships and not the partnership itself, since the income tax was settled solely by the partners thereto. According to the Ministry, the provision introduced by way of amendments to the CIT Act of 28 December 2020 reading: “general partnerships and limited partnerships which have gained the status of CIT payers take into account the events that occurred before the date on which it became a corporate income tax payer, affecting the amount of its tax liability in the corporate income tax" also applies APAs issued for partners thereto. Moreover, in the light of civil and economic law, the transactions to which APA related were concluded by a limited partnership, and it is through the prism of its activity that the arm’s length nature of the agreed remuneration should be assessed.
Amendments to the decree on the scope of information provided via tax returns and VAT records
On 17 March 2021, a draft decree of the Minister of Finance amending the decree on the detailed scope of data provided via tax returns and VAT records was published on the Government Legislation Centre’s website.
The draft decree provides for the possibility to use the SAF-T_VAT file to collectively report:
- NIP-bearing receipts up to PLN 450 issued in accordance with Article 106e(5)(3) of the VAT Act, and
- toll invoices and invoices documenting travel to any distance, issued in the form of a single fare ticket by taxpayers authorized to provide services consisting in the transport of passengers by means of: standard-gauge railways, car fleet, sea-going ships, inland and coastal transport means, ferries, airplanes and helicopters.
Another aim of the decree is to dispel the doubts related to the use of designations relating to groups of goods and services (GTU). WEW (internal) and RO (comprehensive internal) files will cease to bear GTU designation and the designation "TP" will apply to transactions in excess of PLN 15,000. The draft decree is being currently assessed. The decree is to enter into force on the day following its publication.
Some charitable contributions and donations made in the previous year can be claimed as a deduction on the annual tax return. There exist two groups of donations. Some donations can be deducted without any limitation, others may amount only up to 6% of the taxable income. The first group covers donations to the Church's charity and care activities, while the second group includes donations for purposes of blood donation by voluntary blood donors, religious worship, vocational education conducted by public schools as well as public benefit organizations (including EU and EEA entities). Importantly, starting from 2020, a deduction can be claimed for donations made to counteract the COVID-19 pandemic as well as donations of computer equipment to educational facilities. Yet, the deduction can be applied only to donations made from 1 January 2020 until the end of the month in which the state of epidemic is recalled.