KPMG Weekly Tax Review 27 SEP - 04 OCT 2021

It is 27 September 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• Amendments to draft bills proposed under the Polish Deal
• SAC resolution: The Act on Local Taxes and Charges is decisive for the classification of structures under real estate tax
• New clearance opinion on downstream mergers
• Clearance opinion on decreasing depreciation rates in the Special Economic Zone
• If a legal norm refers to provisions other than tax, the authority must interpret them

A draft bill introducing amendments to Polish tax regulations under the Polish Deal program has been processed by the Sejm. It has been subject to amendments made by MPs, the most important of which include: excluding some tax capital groups from the minimum income tax scheme, provided that the share of their total income in total revenue is greater than 1%, enabling the middle-class relief to be applied by individuals conducting business activity under the tax scale, deferring entry into force of the provisions on hidden dividends, postponing entry into force of provisions on VAT groups until 1 July 2022, replacing the currently existing method of settling taxes by single parents with a relief amounting to PLN 1.5k, introducing a relief for families with many children (above four) or enabling pensioners who give up their retirement pension and continue work to apply a tax relief up to the amount of PLN 85,000. Further amendments may also be introduced once the draft bill is passed to the Senate.

On 29 September 2021, a bench of seven judges of the Polish Supreme Administrative Court (SAC) adopted a resolution (case file III FPS 1/21) by which it was determined that pursuant to the provisions of the Act on Local Taxes and Charges and the Construction law it is impossible to classify a structure meeting the definition of a building as a building structure. This means that even if a structure is a building structure within the meaning of the Construction Law, but also meets the conditions to be recognized as a building for the purposes of real estate tax under the Act on Local Taxes and Charges, and its distinguishing feature is the usable area, it should be taxed in accordance with the rules applicable to buildings. The resolution was issued in relation to the latest controversy recurring in the jurisprudence of administrative courts as to whether silos, tanks and other similar storage facilities constitute building structures under real estate tax, even if they display building features specified in the Act on Local Taxes and Charges. The resolution may be of importance to entrepreneurs owning cubature storing facilities, such as silos. In the case of structures with the distinguishing feature being their cubature rather than usable area, it may be justified to treat them for the purposes of real estate tax as building structures.

On 27 September 2021, a clearance opinion dated 27 September 2021 (case file DKP2.8011.8.2021) on tax consequences of downstream mergers under group reorganization proceedings was published on the Ministry of Finance’s website. In the opinion issued, the Head of the National Revenue Administration ruled that the planned downstream merger could be performed for justified economic reasons, other than obtaining a tax advantage in the form of a tax-neutral takeover of the company's assets by an acting reasonably and with legally justified purposes. Consequently, the Head of the National Revenue Administration stated that the general anti-avoidance clause should not apply.

Two new clearance opinions issued by the Head of the National Revenue Administration on the time-limited reduction of depreciation rates on fixed assets used in business activity conducted in the Special Economic Zone for the time of the state aid being applied by the taxpayer, were published by the Ministry of Finance. In the Head's opinion, although the reduction of depreciation rates in the Special Economic Zone is primarily aimed at obtaining a tax advantage, it cannot be concluded that an entity acting reasonably and with legally justified purposes would not embark on such a course of action. Consequently, the anti-avoidance clause finds no application to the tax benefit obtained by the Applicants as a result of the actions performed.

In its ruling of 23 September 2021 (case file FSK 1573/19), the Supreme Administrative Court found that if the scope a legal norm goes beyond tax provisions, including regulations from other legal domains, the integrating authority shall pronounce itself on such regulations. The case at hand concerned the refusal by the authority to issue a tax advance ruling in a VAT-related matter, in which it was important to recognize whether the equivalent of depreciation write-offs on fixed assets and intangible assets transferred to a budgetary establishment by the commune and the state of current assets at the beginning of the reporting period constitute revenue of a budgetary establishment.