KPMG Weekly Tax Review 07 MAR - 14 MAR 2022 KPMG Weekly Tax Review 07 MAR - 14 MAR 2022 KPMG Weekly Tax Review 07 MAR - 14 MAR 2022

It is 14 March 2022. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• Act on support for Ukrainian refugees passed by the Sejm
• Amendments to provisions on PIT advance payments and PIT-2 approved by the President
• Order served to a party with an appointed attorney to be null and void
• Amendments to the Penal Fiscal Code announced
• Another SAC’s positive rulings on the limit on debt financing costs
• SAC: amount of tax does not directly stem from entries in the land and building register
• Child relief in PIT for 2021

On 9 March 2022, the Act on support for citizens of Ukraine in connection with armed conflict in the territory of Ukraine was passed by the Lower House of the Polish Parliament. As previously announced, the Act brings a raft of tax-oriented solutions, including the possibility to deduct expenses incurred for the production or the purchase price of goods and rights that are the subject of a donation intended for counteracting the effects of the armed conflict in the territory of Ukraine, made in the period from 24 February to 31 December 2022 to non-governmental organizations (including Ukrainian ones), local government units, Governmental Agency for Strategic Reserves, entities providing healthcare and emergency medical services in Poland and Ukraine, provided that they were not charged into tax-deductible costs, including through depreciation write-offs. However, the exemption of Ukrainian citizens from inheritance and donation tax was abandoned. The bill will now to be submitted to the Senate. The Act is expected to enter into force on the day of its publication, with retroactive effect as from 24 February 2021.

On 8 March 2022, the President signed the Act of 14 February 2022 amending the Personal Income Tax Act, the Act on Vocational and Social Rehabilitation and Employment of Persons with Disabilities, and the Act on the Tax on Extraction of Certain Minerals. The introduced changes are to ensure that remitters reduce income tax advance payments by 1/12 of the tax-reducing amount also in situations where the PIT-2 declaration is submitted during a tax year and not only before the first remuneration in the given tax year is received. Another amendment brought about by the Act consist in statutory regulation of the mechanism for extending the deadlines for collecting and paying the income tax advance, introduced by the Decree of the Minister of Finance dated 7 January 2022 on extending the deadline for collecting and transferring personal income tax advance payments for certain tax remitters.

In its resolution of 7 March 2022 (case file I FPS 4/21), a bench of 7 Supreme Administrative Court judges held that an order of making a decision immediately enforceable served to a party that had appointed an attorney shall be deemed null and void, even if a complaint was filed against it. In the case at hand, the authority served the order directly to the taxpayer, although the case was handled by the taxpayer’s attorney. The taxpayer’s tax advisor only received an unsigned scan of the order. Consequently, both the taxpayer and the taxpayer's attorney lodged complaints. The SAC pointed out that although the general rule is to deliver letters to a party or its representative, in cases where the taxpayer appoints an attorney, the letters are to be delivered directly to them. This is a special provision that excludes the principle of serving the party directly.

On 9 March 2022, draft amendments to the Polish Penal Fiscal Code and certain other acts were published on the Government Legislation Centre’s website. The draft provides for, inter alia: increasing criminal liability in fiscal offenses, modifying the provisions on voluntary disclosure, extending the limitation periods for fiscal crimes and offenses, extending the possibilities related to forfeiture of assets derived from crime, introducing new types of prohibited acts, e.g. dealing in goods from illegal production, counterfeit or forged excise stamps, as well as a number of clarifications and updates to the regulations of the Penal Fiscal Code to adjust it to the current social and economic realities. 

By its ruling of 3 March 2022 (case file II FSK 1558/19), the Polish Supreme Administrative Court confirmed that in situations where the surplus of debt financing costs in taxable activities does not exceed PLN 3 million in a tax year, the taxpayer has the right to include the total debt financing amount into tax-deductible costs. Should, in turn, the surplus exceed PLN 3 million, under Article 15c of the Polish CIT Act, the cap on the excess of the debt financing costs shall be set as a total of PLN 3 million and 30% of tax EBITDA. Another positive ruling in this regard contributes to shaping uniform interpretation of the matter among administrative courts (see the SAC’s rulings of 20 October 2021 (case file II FSK 390/19) and 26 October 2021 (case file II FSK 976/21)) and gives hope for a change in approach displayed by tax authorities. Importantly, the ruling was issued in relation to the legal status in force until 31 December 2021.

In its ruling of 3 March 2022 (case file III FSK 349/21), the Supreme Administrative Court confirmed that the way real estate is used has a direct impact on the amount of real estate tax due on it. Application of the increased rate depends on whether the real estate is used in business activity. When determining whether real estate is related to the conduct of business, the actual connection thereto should be considered. Consequently, classification of real estate in the land and building register does not have a decisive impact on the tax qualification and tax rate.

Taxpayers submitting their return for 2021 may apply child relief, which is one of the most popular types of tax credit provided for under the Polish tax regime. This relief may be applied especially in cases where a minor child stayed in the taxpayer’s parental custody or legal custody for only a part of the tax year. The value of the tax relief depends on the number of children per taxpayer. The value of the tax relief depends on the number of children per taxpayer. The maximum amount of the relief for a single child is PLN 1,112.04. For example, if the taxpayer has three children, they may apply the relief in the amount of PLN 1,112.04 for the first and second child and PLN 2,000.04 for the third child. It should be noted, however, that the possibility to apply the relief for a single child is capped by the taxpayer’s income, e.g., the total income of the spouses may not exceed PLN 112,000 for joint returns.

Read the next episodes of the “Weekly Tax Review”, where, until 2 May 2022, we will explore the key aspects of the 2022 PIT return season.