KPMG Weekly Tax Review 4 APR - 11 APR 2022 KPMG Weekly Tax Review 4 APR - 11 APR 2022 KPMG Weekly Tax Review 4 APR - 11 APR 2022

It is 11 April 2022. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

• CJEU’s ruling in case C-333/20: fixed establishment for VAT purposes
• EC launched public consultation on the new European system to avoid double taxation
• New VAT-R form template
• Poland won against the EC before the CJEU regarding the exemption from excise duty on energy products
• Changed rules of establishing income to calculate health insurance contributions by entrepreneurs
• E-Tax Office project assessed by the Parliament
• New list of states and territories subject to CRS reporting obligation for 2021
• Inclusion of depreciation write-offs made by a real estate company into tax-deductible costs
• Investment income to be settled in a separate return

On 7 April 2022, CJEU pronounced itself on the concept of fixed establishment for VAT purposes . It ruled that: “Article 44 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2008/8/EC of 12 February 2008, and Article 11 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112, must be interpreted as meaning that a company which has its registered office in one Member State has a fixed establishment in another Member State because that company owns a subsidiary there that provides it with human and technical resources under contracts stipulating that that subsidiary provides, exclusively to that company, marketing, regulatory, advertising and representation services that are capable of having a direct influence on the volume of its sales”.

On 1 April 2022, the European Commission launched public consultation on a new initiative to introduce a common EU-wide system for withholding taxes to avoid double taxation. According to EC, the currently applicable procedures related to applying preferential WHT rates or exemptions have proven to be lengthy, resource-intensive, and costly in many Member States. Therefore, it has started an initiative to improve the existing WHT procedures for non-resident investors. The initiative aims to provide Member States with the information to prevent tax abuse in the field of withholding taxes and accommodate a swift and efficient processing of the requests for a refund and/or a relief at source procedures. The consultation period runs until 24 June 2022.

On 31 March 2022, a draft decree of the Minister of Finance, amending the template of the VAT-R(15) form, was published. The need to amend the form is due to adding Article 96(3b) to the Polish VAT Act, which brings the requirement for VAT group members to submit a registration application. VAT grouping is a new tax solution, which is to enter into force on 1 July 2022. Under the new scheme, entities having financial, economic, and organizational relationships will be able to file joint VAT settlements. The current version of the VAT-R(15) form can be used until 31 July 2022. At the same time, however, the draft decree stipulates that the new regulations will not apply to a representative of a VAT group submitting a VAT group registration application. New regulations are to enter into force on 1 July 2022. The draft decree is currently being assessed. 

On 31 March 2022, the Court of Justice of the European Union dismissed the EC’s complaint regarding the ruling on the exemption from excise duty on energy products and ordered it to cover the costs of the proceedings. The EC accused Poland of non-compliance with Directive 2003/96/EC. It challenged national regulations under which energy products exempted from excise duty are used by energy-intensive undertakings covered by the EU Emission Trading System. Poland repeatedly pointed to the fact that the provisions of Directive 2003/96/EC do not prevent energy-intensive undertakings covered by the EU Emission Trading System from using the exemption and that, consequently, EU law was implemented by Poland in a correct manner. The Court stated that the wording of Directive 2003/96/EC does not support the Commission's assertion that the concept of a "tradable permit scheme", referred to in Article 17(1)(b) and Article 17(4) of Directive 2003/96/EC, must be interpreted as referring only to systems aimed at achieving environmental objectives or increasing energy efficiency beyond what is implied by the operation of other mandatory systems. Thus, the Court dismissed the arguments raised by the Commission.

On 9 February 2022, the President signed the Act amending the Polish Code of Commercial Companies and certain other acts. The Act modifies, inter alia, the rules of establishing income to calculate health insurance contributions by entrepreneurs, which will now take place considering stocktaking differences. Entrepreneurs are expected to establish income for the purpose of health insurance contribution calculation based on similar principles as in the case of income tax. This means that when determining the income to calculate health insurance contributions, stocktaking differences will be taken into account, including purchases from previous years. Consequently, taxpayers who purchased goods in 2021, but are about to sell them in 2022, must consider expenses incurred in relation to the purchase when calculating health insurance contributions.

On 5 April 2022, a governmental draft bill amending certain acts in order to automate the handling of certain matters by the National Revenue Administration was submitted before the Lower House of the Polish Parliament. The bill brings a new e-Tax Office system intended for five groups of stakeholders, i.e., taxpayers, remitters, proxies, bailiffs, and notaries. Furthermore, the bill provides for clarification of obligations set before VAT groups at the stage of registration as a VAT payer and excluding the possibility of offsetting payments of VAT amounts due to the import of goods and excise duty due to the import of goods against tax arrears. Finally, it will be also possible to submit voluntary disclosures, by adding section 4a to Article 16 of the Polish Fiscal Penal Code, which is to supplement Article 16(4) thereof and to relate solely to financial authorities conducting preliminary proceedings.

On 31 March 2022, a notice of the Minister of Finance dated 29 March 2022 on the list of states and territories subject to reporting obligation for 2021 was published in the Polish Official Gazette. Holding bank accounts in the countries listed in the notice gives rise to the reporting obligation as part of the automatic exchange of information on reportable accounts (CRS). The obligation stems from Article 22(3) of the Act of 9 March 2017 on the exchange of tax information with other states (Journal of Laws of 2021, item 626, as amended). Compared to last year, the list has been notably extended (the list for 2020 contained 50 items, while the list for 2021 contains as many as 82 items). 

On 31 March 2022, the Head of the National Revenue Administration issued an individual ruling on depreciation in real estate companies under provisions in force until 1 January 2022. The entity was not sure whether the cap set by Article 15(6) of the CIT Act would apply to real estate companies not making depreciation write-offs in line with Article 28(1)(1a) of the Accounting Act. The authority stated that since the company does not make depreciation write-offs on the held real estate in line with the accounting provisions, it would not be authorized to recognize tax-deductible costs on the account of depreciation write-offs made under the CIT Act. The amending act does not provide for any interim provisions, meaning that the discussed regulations should apply to events occurring starting from 1 January 2022. Since depreciation write-offs are made "on an ongoing basis", the tax and legal effects thereof should be assessed based on the regulations currently in force.

A separate PIT-38 form must be submitted by all taxpayers who in 2021 earned private revenue (i.e., revenue outside the conducted business activity) from share alienation or disposal of securities. The taxable amount of revenue from the alienation of shares is the actual revenue (the amount received from the transaction) less tax-deductible costs. Importantly, the binding date is the date of the disposal against payment and not the date on which the deductible costs were incurred nor the date on which the rights to the currently realized profits from the sale of securities were acquired.

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.