It is 25 April 2022. 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:
- PIT-related amendments to the Polish Deal program passed by the government
- Sales of multiple plots should be treated as business activity
- Cap on intangible service and debt financing costs in special economic zone activities
- Place of entering into civil law transaction when buying goods from foreign entities online via “buy it now” option considering the Act on Civil Law Transactions
- Draft bill amending certain acts to reflect the development of e-administration
- Possibility to recover VAT on invoices from before the registration
- New PIT incentives in connection with armed conflict in Ukraine
PIT-related amendments to the Polish Deal program passed by the government
On 22 April 2022, the Council of Ministers of Poland passed the bill amending the personal income tax act and certain other acts. The bill brings some modifications to the amendments brought by the Polish Deal program, including reduction of the PIT rate from 17 to 12 percent, resignation from the middle-class relief, introduction of the possibility of returning to settling taxes according to the tax scale for those who used flat-tax or lump-sum tax schemes, possibility to deduct a portion of healthcare insurance contributions for entrepreneurs using the flat tax, lump-sum tax or fixed amount tax schemes, re-instituting joint returns for single parents and their children (replacing the currently existing relief in the amount of PLN 1,500) and harmonizing the deadlines for filing PIT returns (now fixed at 30 April). What remained unchanged is the tax-free amount (PLN 30 thousand) and the raised threshold for entering the higher income tax bracket (PLN 120 thousand). Essential amendments brought about by the bill are to enter into force on 1 July 2022.
Sales of multiple plots should be treated as business activity
In its rulings of 29 March 2022 (case files II FSK 1837-38/19 and II FSK 1854-55/19), the Supreme Administrative Court held that the division of land into seven individual land plots in two years (or 50 in total, when considering the activities from the previous years) and disposal thereof bear the marks of business activity and as such should not be treated merely as manifestation of personal property management. The case at hand related to spouses who in the periods from 1993 to 1999 and from 2003 to 2015 bought and sold land plots, with the intention to expand their farm and replace poor quality land with better one. According to the tax authorities, the spouses conducted unregistered economic activity, as evidenced, inter alia, by the number of purchased plots (including in the previous years) and applications for decisions on land development and management conditions filed by the spouses. The Court upheld the decision of tax authorities of both instances adjudicating in the case.
Cap on intangible service and debt financing costs in special economic zone activities
In its ruling dated 14 April 2022 (case file I SA/Go 452/21), the Regional Administrative Court in Gorzów Wielkopolski stated that correct application of Article 7(3) of the CIT Act as stipulated by Articles 15c and 15e thereof means that when determining the cap on intangible service and debt financing costs, the revenue and costs of obtaining revenues from sources of revenues, the income from which is not subject to income tax or is tax-free, are not taken into account. As a result, the material caps should not be applied to income from special economic zone activities. Importantly, the ruling relates to the state as before 1 January 2022.
Place of entering into civil law transaction when buying goods from foreign entities online via “buy it now” option considering the Act on Civil Law Transactions
In its ruling of 14 April 2022 (case file I SA/Po 502/21), the Regional Administrative Court in Poznań stated that for purchases made by Polish taxpayers via foreign marketplace sites, the related contract shall be deemed concluded in Poland. Consequently, given that the purchaser is a Polish taxable person and the contract is concluded in Poland, the sales transaction should be subject to the Polish Act on Civil Law Transactions. This means that the Polish taxpayer is liable to tax under the sales contract at the rate of 2% for the purchase of movables.
Draft bill amending certain acts to reflect the development of e-administration
On 21 April 2022, a draft bill amending certain acts to reflect the development of e-administration was published on the Government Legislation Centre’s website. The bill seeks to introduce legal changes to improve and develop e-administration in Poland. It brings a raft of provisions governing the rules of functioning of the ICT system in the form of a publicly available electronic platform, “GOV.PL portal”. The system is to allow public entities to provide online services and share information related to the tasks performed. Moreover, the bill proposes to extend the validity of documents issued by the court not only to printouts of such documents, as it is now, but also to electronic versions thereof, generated in the ICT system, based on which such printouts are made.
Possibility to recover VAT on invoices from before the registration
In an individual ruling dated 8 April 2022 (case file 0114-KDIP1-3.4012.62.2022.2.KP), the Head of the National Revenue Administration held that an entrepreneur has the right to deduct input tax calculated when receiving the invoice, yet, in order to do so, they must be an active VAT payer. The case at hand related to a taxpayer who bought an apartment for short-term rental purposes. Until the completion of the real estate developer’s construction, the buyer made advance payments documented by invoices, yet at that time they still were not a registered VAT payer. The taxpayer intended to register as such and apply for a refund of VAT paid on the advance payments at a later stage. The Head of the National Revenue Administration confirmed that it was possible. According to the authority, exercising the right to deduct input tax is possible if there exists a connection between the purchase made and the taxable activities performed, i.e., activities which result in the determination of the output tax.
New PIT incentives in connection with armed conflict in Ukraine
On 14 April 2022, the Act dated 8 April 2022, amending the Act on aid for the citizens of Ukraine in connection with the armed conflict on the territory of that country and certain other acts, was promulgated. The amendments bring the possibility of deducting the taxable base by donations made from 24 February 2022 to 31 December 2022, the value of which or the costs of manufacturing thereof were included by the taxpayer into tax-deductible costs. Moreover, the Act explicitly gives the possibility of granting the Polish taxpayer status to Ukrainian citizens who came to Poland in connection with hostilities in the territory of Ukraine, based on a declaration on the transfer of their centre of vital interests to the Republic of Poland.