KPMG Weekly Tax Review 03 JAN - 10 JAN 2022 KPMG Weekly Tax Review 03 JAN - 10 JAN 2022 KPMG Weekly Tax Review 03 JAN - 10 JAN 2022

It is 10 January 2022. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• Decree introducing changes to the method of collecting PIT advance payments
• Cross-border conversions involving employees
• Draft Directives on the minimum tax and ATAD III
• Minister of Finance’s general ruling on controlled transactions
• Minister of Finance’s general ruling on VAT on the transformation of the right of perpetual usufruct into ownership
• Ministry of Finance informs: PIT-2 should be submitted only once
• Poland asks the EU to allow applying 0% VAT on food products and energy
• Amendments to Financial Shield 2.0
• Middle-class relief and joint return filed by spouses

On 7 January 2022, a decree of the Minister of Finance on extending the deadline for collecting and transferring personal income tax advance payments for certain tax remitters was announced. According to the decree, the amount of the advance payment for January collected from employees and contractors with the monthly income of up to PLN 12,800 gross should not exceed the amount of advance payment calculated in line with principles applicable until 31 December 2021. Moreover, in situations where in January 2022 the remitter has already collected an advance payment in an amount exceeding the one stipulated in the decree, the excess of the advance payment is to be immediately returned to the taxpayer. Remitters must make the appropriate pay adjustments, if the remuneration paid for January did not consider the methodology of collecting advances provided by the decree. The decree entered into force on 8 January 2022.

On 5 January 2022, a draft bill on the participation of employees in a company formed as a result of a cross-border conversion, merger or division was published on the Government Legislation Centre’s website. The goal of the bill is to incorporate provisions of Directive (EU) 2019/2121 of 27 November 2019 into the national law. Pursuant to the Directive, a special team representing employees is to be established in each cross-border converted company. The mission of the team is to ensure that as a result of the conversion employees are not deprived of the rights they have exercised so far. The employees’ representatives are also to be appointed to the bodies of the company formed as a result of a cross-border conversion, merger, or division. The new provisions are to enter into force on 31 January 2023.

On 22 December 2021, the EU Commission published its proposal for two Directives of significant importance to the international tax law, i.e., the Directive on global minimum tax on large multinationals (under OECD Pillar Two) and the Directive laying down rules to prevent the misuse of shell entities for tax purposes (also referred to as UNSHELL, or ATAD III Directive). The first Directive is to ensure a minimum effective tax rate for the global activities of large multinational groups and should be transposed by the Member States into their national laws by 31 December 2022. It is to become applicable on 1 January 2023. The second Directive is to ensure that entities in the European Union that have no or minimal economic activity are unable to benefit from any tax advantages and do not place any financial burden on taxpayers. Once adopted by the Member States by July 2023, the proposal should come into force as of 1 January 2024.  

On 30 December 2021, the Minister of Finance’s general ruling of 29 December 2021 (case file DCT1.8203.4.2020) on defining controlled transactions in line with the laws in force in Poland as from 1 January 2019 was published. According to the general ruling, three main prerequisites must be met for a controlled transaction to occur: as part of the transactions actions of an economic nature must be taken, they must be identified based on the actual behaviour of the parties (and not based on the provisions of the contract itself), and their terms must be established or imposed because of a relationship. At the same time, it was indicated that “established or imposed as a result of a relationship” does not necessarily mean that the transaction must be directly entered into by related entities. It is sufficient that the relationship influenced the determination of the content of the activities. Any assessment of whether an action constitutes a controlled transaction should be made on a case-by-case basis, considering its specificity and may differ from the perspective of each party to the transaction.

On 29 December 2021, the Minister of Finance’s general ruling of 22 December 2021 (case file PT1.8101.2.2021) on value-added tax on the transformation of the right of perpetual usufruct into ownership made under the Act of 20 July 2018 on the transformation of the right of perpetual usufruct of the land developed for residential purposes into the ownership title to this land was published. According to the ruling, there is no possibility to treat the act of transformation of the right of perpetual usufruct into ownership as the continuation of the original activity, being the supply of the land made upon establishment of the right of perpetual usufruct. Furthermore, in cases of transformation by operation of law, two separate supplies of goods can be distinguished: the act of establishing the right of perpetual usufruct, resulting in the transfer of economic ownership to the current perpetual lessee and the act of transforming the right of perpetual usufruct into ownership by virtue of law, resulting in the transfer of legal ownership to the perpetual lessee. Moreover, pursuant to the ruling, the remuneration due for the transformation already includes VAT (i.e., it should be treated as a gross amount). The basis for issuing the ruling was the judgment of the Court of Justice of the European Union (C-604/19) of 25 February 2021.

On 4 January 2022, the Ministry of Finance informed that the PIT-2 declaration entitling the employer to reduce PIT advance payments by the tax-reducing amounts is essentially submitted only once, upon starting employment, and remains valid in the subsequent tax years, until revoked by the employee. If the taxpayer refrains from submitting the PIT-2 declaration, the remitter (usually the employer) collects the income tax advance payment without reducing it by 1/12 of the tax-reducing amount. 

In reply to the parliamentary inquiry no. 28608 on the inflation rate in Poland, the undersecretary of state in the Ministry of Finance, Piotr Patkowski, informed that the Ministry of Finance had requested approval from the European Commissioner for Economy to cut VAT on food, natural gas, electricity, and heat to zero. The reduced VAT would apply temporarily, ca. for 6 months. According to the announcements made in December by Prime Minister Mateusz Morawiecki , if the European Commission approved the reduction, it would apply from February 2022. 

On 31 December 2021, the Cabinet passed in a rotary mode a resolution amending the act on the government program “Financial Shield for large businesses provided under the Polish Development Fund”. According to the resolution, the deadline for granting aid to large companies in the form of a Preferential Loan 2.0 under the PDF Financial Shield was extended until 31 March 2022, with the possibility of disbursement until 30 June 2022. Preferential Loan 2.0 is an instrument of financial support in form of state aid, redeemable in the amount of up to 75% of its face value.

The Polish Deal introduced to the Polish tax law a solution dubbed middle-class relief. It was to neutralize the effects of eliminating health insurance premium deductibility in PIT. The relief can be applied by employees with revenue between PLN 68,412 and PLN 133,692 annually, including taxpayers filing joint returns with their spouses. However, doubts arose as to the case when only one spouse meets the criteria for applying the relief. In the unofficial reply given to the Polish Press Agency, the Ministry of Finance confirmed that also in the situation where only one of the spouses earns revenue making them eligible for applying the middle-class relief and the other one earns less, or one of the spouses exceeded the threshold, but the second one remains in the statutory brackets, the middle-class relief can be applied in the joint settlement.