It is 27 June 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:
- Preliminary remarks to CIT amendments under Polish Deal 2.0
- Global minimum tax still on hold
- Extension of CIT-8E submission deadline announced
- Further amendments to Financial Shields announced
- Determining the one-off transaction value under a lease agreement concluded for an indefinite period (excluding some costs from tax-deductible costs pursuant to Article 15d (1) of the CIT Act)
- Principles of allocating some indirect costs, which the company is unable to assign to the corresponding sources of income, in the case of receiving income in the form of dividends from domestic and foreign companies
Preliminary remarks to CIT amendments under Polish Deal 2.0
On 20 June 2022, the Chancellery of the Prime Minister issued preliminary remarks to a draft bill amending the Corporate Income Tax Act and certain other acts. The bill supplements amendments brought by the Polish Deal 2.0 program in terms of personal income tax.
The key proposals include: modifying the minimum income tax scheme and suspending its effectiveness until 31 December 2022, introducing provisions eliminating double or multiple taxation of CFCs making cascading dividend payments within holding structures, amending WHT provisions, clarifying the amount excluded from tax-deductible costs within the limit of debt financing costs, making the PHC (Polish Holding Company) regime available to a larger group of businesses, repealing hidden dividend regulations and clarifying provisions on settling losses by tax group members.
Global minimum tax still on hold
During a meeting held on 17 June 2022, the Economic and Financial Affairs Council (ECOFIN) adopted its implementing decision on the approval of the Polish National Recovery Plan and discussed, inter alia, a draft directive on ensuring a global minimum level of taxation for multinational groups in the EU.
The text of the directive assessed by the Council for adoption accommodated recommendations made by Poland, which is why Poland retracted its objections, yet the document remains blocked by the Hungarian Minister of Finance.
Extension of CIT-8E submission deadline announced
On 22 June 2022, a draft decree of the Minister of Finance on extending the deadline for fulfilling selected obligations related to corporate income tax was published on the Government Legislation Centre’s website.
The draft extends the deadline for submitting the CIT-8E return until the end of September 2022. The extension is to apply to all lump-sum corporate income tax payers with tax years ending from 1 December 2021 to 31 May 2022.
Further amendments to Financial Shields announced
On 21 June 2021, the Council of Ministers adopted draft resolutions amending resolutions on the governmental support programs called: “Financial Shield for micro-, small, and medium businesses provided under the Polish Development Fund”, “Financial Shield 2.0 for micro-, small, and medium businesses”, and “Financial Shield for large businesses provided under the Polish Development Fund”.
The resolution provides that, if necessary, the Polish Development Fund will provide temporary financing for investments implemented under the National Recovery Plan. Moreover, small and large businesses receiving subsidies under the Shields will not be required to reimburse the entire amount granted, even if by 30 June 2022 they do not reconcile the refund of the difference between the amount of the subsidy and the actual decrease in their revenues. Under the draft resolutions, the Polish Development Fund is also to become authorized to reimburse entities under a new instrument dubbed “Border Shield” [Tarcza dla Pogranicza].
Determining the one-off transaction value under a lease agreement concluded for an indefinite period (excluding some costs from tax-deductible costs pursuant to Article 15d (1) of the CIT Act)
In its ruling dated 21 June 2022 (case file II FSK 2815/19), the Supreme Administrative Court held that a “one-time” transaction within the meaning of Article 22(1) of the Act on freedom of economic activity should cover not only an instalment, but the entire contract under which it is paid. As a result, “one-off transaction value” should mean the value of payments made under a single contract, and not the value of each payment made under it. Consequently, in case of a lease contract, the one-off transaction should be understood as the entire contract, and the “one-off transaction value” - as the sum of all payments made on this account.
As a result, Article 15d of the CIT Act, pursuant to which taxable persons shall not charge a cost into tax deductible expenses to the extent in which a payment relating to the transaction the one-off value of which, regardless of the number of payments made under it, exceeds PLN 15,000 or an equivalent thereof, was made without payment account intermediation, may apply to a lease contract.
Principles of allocating some indirect costs, which the company is unable to assign to the corresponding sources of income, in the case of receiving income in the form of dividends from domestic and foreign companies
In its ruling dated 14 June 2022 (case file II FSK 2643/19), the Supreme Administrative Court held that considering the literal wording of Article 15(2) and (2a), principles of pro rata find no application to revenue subject to lump-taxation according to special principles. As a result, revenue subject to lump-sum taxation should be excluded from calculations to determine the proportionate allocation of indirect costs. Moreover, the taxable base for corporate income tax in the case of dividends from subsidiaries established outside Poland is income, therefore dividend income, despite being possibly exempt under Article 20(3) of the CIT Act, should be taken into account when determining the proportion referred to in Article 15(2) and (2a) of the CIT Act.