It is 24 October 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:

On 18 October 2022, a draft decree amending the act on upbringing in sobriety and counteracting alcoholism, the act on public health, and certain other acts was published on the Government Legislation Centre’s website. Importantly, the bill modifies the currently applicable regulations on the sugar tax and the fee on alcohol bottles of up to 300ml by clarifying the tax point, introducing a mechanism to verify whether the fee was paid by wholesalers at the beginning of the supply chain, and shifting the obligation to pay the fee from retailers or sellers supplying retail outlets to manufacturers and importers. New provisions are expected to enter into force on 1 July 2023. 

On 18 October 2022, a notice of the Minister of Finance dated 14 October 2022 was announced. The notice relates to publishing the record of countries and territories entered on the EU list of non-cooperative jurisdictions for tax purposes, currently being adopted by the European Council, which have not been included in the list of countries and territories applying harmful tax competition issued on the basis of the Polish provisions on personal income tax and the provisions on corporate income tax, including the date of adoption of the record by the Council. The notice lists non-cooperative jurisdictions for tax purposes, which have not been entered on the domestic list established based on Polish income provisions, yet present on the EU list. It, inter alia, the Bahamas, the Republic of Fiji, Guam, the Republic of Palau, the Republic of Trinidad and Tobago, Turks and Caicos Islands, and American Samoa. 

On 17 October 2022, a clearance opinion dated 13 October 2022 (case file DKP2.8082.3.2022) on voluntary redemption of shares was published. In the case at hand, the legal structure of a group was to be adjusted to the actual business operations pursued thereby through voluntary redemption of shares held by the owners of particular entities without remuneration. Such a division would also facilitate succession proceedings planned for the future. According to the Head of the National Revenue Administration, the above-described activities can bring a tax benefit, i.e., no profit from share redemption, which, however, is not the primary or one of the primary purposes behind performing them, nor does it go against the subject or purpose of tax law or its provision, and the action described the applicant will not be deemed of artificial character. Consequently, Article 119(1) of the Tax Code finds no application.

In its ruling dated 18 October 2022 (case file II FSK 424/20), the Supreme Administrative Court held that interest on delay in returning an unduly collected guarantee is not linked to the company's direct operations and is not incurred in order to maintain or secure the company’s source of revenue. Consequently, it cannot be recognized as tax-deductible. According to the Court, a cause-and-effect relationship between paying the interest and the revenue earned by the company cannot be demonstrated.

In its ruling dated 18 October 2022 (case file II FSK 393/20), the Supreme Administrative Court stated that revenue earned as a result of assignment of receivables under a factoring agreement shall be treated as a category of revenue separate from revenue from the original transaction giving rise to the assigned receivable. As a result, revenue from the assignment of receivables should be recognized in the amount corresponding to the price set forth by the contract of sale. Recognizing sale of receivables to the factor as tax revenue gives the possibility of recognizing the tax-deductible costs of this transaction in the amount of previously reported revenue due from the sale of goods and services (net), less any repayment previously made by the counterparties of the company.

In its ruling dated 18 October 2022 (case file II FSK 444/20), the Supreme Administrative Court pronounced itself in the case of a company which entered with its direct shareholder in a service agreement, under which the provider renders a raft of services, including the workplace service and the service consisting in enabling access to software. In the Court’s opinion, at the current stage of economic development, it is impossible to run a professional and modern business and produce goods without a workplace and software access services. Therefore, it cannot be expected that the cost of IT services will be incorporated into specific and identifiable products as the cost of their production. Consequently, such costs are directly related with product manufacturing and they are not limited by the cap on deductible costs provided by Article 15e of the CIT Act.

In its ruling dated 14 October 2022 (case file II FSK 375/20), the Supreme Administrative Court pronounced itself in the case of a company willing to implement an incentive plan intended for the members of its board. According to the Court, the company incurs the costs of purchase of own shares, which means that it shall be eligible for charging related expenses into tax-deductible costs only when the income from the sale of these shares is determined. Consequently, contrary to the company’s opinion, costs of purchase of own shares cannot be recognized under Article 15(4d to 4e) of the CIT ACT.

The Ministry of Finance has published an updated TPR Guidebook, i.e., a list of answers to questions on transfer pricing reporting obligations. The third edition of the Guidebook features extended answers to questions published in the previous versions of the document, but also new issues thoroughly discussed. The TPR Guidebook for 2021 covers, inter alia, amendments brought by TPR decrees already applicable to transfer pricing reports submitted for 2021. These changes relate to the limitation of the scope of data and information indicated in the transfer pricing report for transactions that have been exempted from the obligation to include benchmarking or compliance analysis in the Local File.

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