KPMG Weekly Tax Review 10 OCT - 17 OCT 2022

On 14 October 2022, the Ministry of Finance issued tax clarifications on VAT groups. VAT groups allow the taxpayers forming them to settle VAT as a single entity. The provisions thereon are to become effective on 1 January 2023. The clarifications concentrate on prerequisites (conditions) for forming VAT groups, rules of making VAT settlements in the course of group operation and issues related to the termination of group activities. A lot of focus was placed on the rights and obligations in force in the transitional period. Importantly, according to the Minister, a VAT group should be treated as a new taxpayer and, consequently, may enjoy subjective or objective exemption from the use of cash registers under general principles, while the very formation of a VAT group will not be perceived as a tax scheme reportable to the Head of the National Revenue Administration.

On 7 October 2022, the Minister of Finance replied to a parliamentary inquiry no. 35972 on obligations of partners in real estate companies. The Minister explained, inter alia, that the obligation to file PIT-N2 and CIT-N2 forms lies with each taxpayer acting as a partner in a real estate company holding, directly or indirectly, at least 5% of voting rights in such a real estate company or all rights and obligations giving at least a 5% share in the profit of the company or at least 5% of the total number of units of participation therein. The reporting obligation arises regardless of whether in the tax year at the end of which the form is submitted revenue was obtained from the sale of rights to a real estate company for consideration or under another title (e.g., dividends). Moreover, according to the Minister’s reply, if the scope of interest in a real estate company cannot be quantified in relation to its legal form (e.g., general rights and obligations in a partnership), the percentage corresponding to the taxpayer's direct and indirect share in the real estate company should be specified and this numerical value (i.e., without "%") entered into row 23 of the form. As a result, it should be assumed that the number of rights held in the real estate company is that percentage share. 

In its resolution dated 10 October 2022 (case file III FPS 2/22), a bench of seven judges of the Supreme Administrative Court held that gas grids should be treated as structures and taxed accordingly. The Court found that in order to subject stations, gas pressure reducing stations, pressure reduction/measuring units and measuring units to real estate tax, it is of crucial importance to establish whether there exists a technical and operational relationship between these facilities and the pipeline, which determines the taxation of these facilities as structures or parts thereof. Even though the resolution pertains to gas grids, it may find application to taxation of other grids, such as electricity and power or water supply networks. 

In its ruling dated 12 October 2022 (case file II FSK 334/20), the Supreme Administrative Court held that payments made to cover the costs of transport of a posted worker shall be treated as taxable revenue of that employee. In the Court’s opinion, the financing of such transport lies primarily in the interest of posted workers, as they avoid the costs they would have incurred themselves, had they decided to enter into a contract for work that would be rendered abroad. According to the statement of reasons for the ruling, the Court pointed to previous rulings, where a similar opinion was expressed, including the rulings dated 8 April 2022 (case file II FSK 1841/19) and 16 January 2020 (case file II FSK 285/18). 

In its ruling dated 11 October 2022 (case file I FSK 396/21), the Supreme Administrative Court pronounced itself in the case of an EU company, the activities of which included moving its own goods from Poland to warehouses located in other EU countries and the other way round. The Company is registered as an active VAT payer in Poland, it is not the owner of or s party to any contract in relation to commercial real estate located in Poland, it does not employ any staff domestically, and it purchases logistics services from service providers. The Company was not sure whether it should be treated as having a fixed establishment within the territory of Poland. In the opinion of the Court, the emphasis should be on whether, in addition to using resources, the taxpayer has any rights to dispose thereof in a manner similar it would have been able to, had they belonged to it. In the case at hand, the use of resources under contracts with service providers did not translate into the Company’s right to dispose of such fixed resources.

In its ruling dated 7 October 2022 (case file II FSK 108/20), the Supreme Administrative Court held that exchange rate fluctuations related to loan agreements the sole purpose of which is to secure transactions of key importance to the company’s operations should not be treated as related to external financing acquisition and, consequently, as debt financing costs. According to the Court, derivatives are used by the company to secure its primary source of income and not to obtain external financing. Additionally, the Court noted that the amount of PLN 3 million referred to in Article 15c of the CIT Act should be treated as reducing the surplus on debt financing costs. Consequently, the cap on charging financial expenditure into costs will not apply to the surplus on debt financing in the part not exceeding the amount of PLN 3 million per tax year.

In its ruling dated 7 October 2022 (case file II FSK 225/20), the Supreme Administrative Court pronounced itself in the case of a taxpayer being a shareholder in a Polish limited liability company. The company decided to redeem the taxpayer’s shares against remuneration, with the taxpayer’s consent. The taxpayer wanted to know whether the remitting obligation lies with them or with the company. According to the Court, in this situation, it is the taxpayer who should independently calculate the tax and notify of it the authorities via PIT-38 return by 30 April of the subsequent year. Moreover, in such circumstances, the company has no remitting obligations, yet it is still obliged to submit the PIT-8C form. To conclude, the shareholder (taxpayer) who obtained income from capital gains (due to the sale of shares) is obliged to independently calculate and pay the tax in connection with the voluntary redemption of shares against payment, while the company must submit individual information on the income earned on capital gains (PIT-8C).

On 13 October 2022, the decree of the Minister of Finance on determining the value of items and property rights that are free of or exempt from inheritance and donation tax and the tax scales according to which this tax is calculated entered into force. Consequently, new personal allowances and tax scales in inheritance and donation tax apply from that date, meaning that the threshold on tax-exempt acquisitions of money or other tangible property is now as follows:

• Up to PLN 10,434 - from a single donor,
• Up to PLN 20,868 - from a number of donors jointly.

Furthermore, net amounts of acquired items and property rights excluded from taxation are:

• PLN 10,434 – if the acquiring individual is classified in tax group 1,
• PLN 7,878 – if the acquiring individual is classified in tax group 2,
• PLN 5,308– if the acquiring individual is classified in tax group 3.

Under the decree, the tax scales applicable so far also got amended.