It is 20 December 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 Polish Deal provisions

Even before its entry into force, the adopted and promulgated Act providing a raft of tax changes under the Polish Deal was amended to remove legislative errors it contained. The Senate received the bills passed by the Sejm amending the excise duty regulations, which also included amendments to the Polish Deal. One of the changes fills the gap in provisions on health insurance scheme for business owners willing to apply 19 percent flat PIT in 2022, giving rise to a situation where entrepreneurs incurring the tax loss would not pay the health insurance premiums. The amendments are also to influence middle-class relief provisions, bringing a clarification that revenue from business activity to which tax scale is applied shall be reduced by tax-deductible costs of running a business. Regulations on tax-deductible costs incurred because of transformation of companies, profit shifting, and deadline for submitting a declaration on applying preferential taxation schemes resulting from double taxation treaties by WHT remitters are also to be clarified. The date of entry into force of the provisions on the reduced limit of cash payments between entrepreneurs and the consumers’ obligation to make non-cash payments to entrepreneurs will also be postponed from 2022 to 2023. The amendments are likely to be published in the Journal of Laws before the end of the year.

Amendments to the provisions on cash payments postponed by a year

On 9 December 2021, the Lower House of the Polish Parliament passed the bill amending the Excise Duty Act and certain other Acts. The main purpose behind the bill is to implement an anti-inflation package and bring temporary reductions in excise tax on fuels and electricity. Importantly, it also contains a raft of amendments to the Act implementing the Polish Deal program, including postponing the entry into force of provisions reducing the limit of cash payments made between businesses from PLN 15k to 8k from 2022 to 2023, and introducing the requirement for entrepreneurs to accept only non-cash payments from consumers above the threshold of PLN 20k. Consequently, the above-mentioned modifications are to enter into force 12 months later than initially expected. Importantly, however, the entry into force of the provision under which, starting from 2022, entities will be obliged to provide consumers with the possibility of making electronic payments was not postponed. The bill passed by the Sejm is now being assessed by the Senate.

Ministry of Finance announces new clarifications to the WHT collection mechanism

On 1 January 2022, the amended regulations on the withholding tax (WHT) collection and settlement method, several times postponed by the Ministry of Finance, are to finally enter into force. Starting from 2022, in situations where passive payments made in favour of foreign entities exceed PLN 2 million, the payer must withhold a properly calculated tax on the surplus thereon, irrespective of the provisions of double taxation treaties, and only then may apply for a refund of the tax paid. Importantly, the requirement to apply the new collection mechanism was narrowed to passive payments, excluding payments for intangible services, made to the benefit of related entities that are not Polish tax residents. Now the Ministry of Finance announced that with the beginning of 2022, it is to publish tax clarifications regarding the new WHT collection mechanism. 

Notice on tax strategy published by the Ministry of Finance

On 15 December 2021, an official notice confirming that taxpayers are required to publish information on the tax strategy being implemented for 2020 by the end of December 2021 was published on the Ministry of Finance’s website. According to the approach adopted by the Ministry, the assessment of whether 5 percent of the balance sheet total within the meaning of the Accounting Act, determined as per the last approved financial statement of the Company, was exceeded should consider the total (accumulated) value of all transactions entered into by the taxpayer and related entities in a given tax year. Should the above-mentioned threshold be exceeded, the information provided by the taxpayer must contain data on all transactions entered into with related entities within the period to which the information applies.

Tax scheme provisions may be subject to an individual ruling

In its ruling of 8 December 2021 (case file III FSK 4548/21), the Supreme Administrative Court gave its opinion on individual rulings in tax scheme-related matters. According to the SAC, even though the provisions on tax arrangements do not directly shape the tax liability, they indirectly influence it. Furthermore, the SAC noted that the protective power of an individual ruling extends beyond the amount of the tax liability due, to cover penal fiscal liability for failure to submit or submitting incorrect information on a tax scheme. 

General ruling on homogeneous transactions in transfer pricing

On 15 December 2021, the Ministry of Finance published a general ruling of 14 December 2021, case file DCT2.8203.2.2021, on the notion of controlled transaction of a homogeneous nature for the purposes transfer pricing regulations. According to the Ministry, when assessing whether a controlled transaction is homogeneous, one should take into account the uniformity of the controlled transaction in economic terms, the comparability criteria specified in the regulations, methods of transfer pricing verification and other relevant circumstances of the controlled transaction. Homogeneous nature of a transaction should be understood as the similarity of the subject of the transaction and other main parameters of the transaction, significant from the point of view of transfer pricing. The comparability criteria include the characteristics of the goods, the course of the transaction, the terms of the transaction specified in the contract, the economic conditions at the time and place of the transaction, along with the business strategy. The recognition of controlled transactions as a homogeneous transaction is supported by the application of the same method of transfer pricing verification to each of the transactions making up a transaction of a homogeneous nature, provided that other relevant circumstances of the controlled transaction do not indicate otherwise. Other relevant circumstances include, inter alia, using safe harbour.