It is 10 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 7 October 2022, the Lower House of the Polish Parliament examined amendments to the Act amending the Act on Corporate Income Tax and certain other acts (commonly referred to as Polish Deal 3.0) proposed by the Senate. As a result, editorial and legislative amendments were adopted by MPs, including an amendment aimed at establishing definition of average monthly salary in the enterprise sector for the purposes of provisions on lump-sum tax on corporate income and an amendment providing entities belonging to tax groups with tax year starting after 31 December 2022 with a possibility to settle losses incurred before forming the group against income earned during group operation. Other changes proposed by the Upper House of the Polish Parliament, such as removing the link between increased VAT rates and defence expenditure as well as lowering the operating loss threshold or the profitability ratio under which taxpayers are subject to the minimum income tax from 2% to 1%, were rejected by the Sejm. The Act is now to be submitted before the President. New provisions are expected to enter into force on 1 January 2023. 

In its judgment dated 6 October 2022 (case C-250/21), the Court of Justice of the European Union (CJEU) held that a sub-participation agreement constitutes a financial instrument the main object of which is to grant financing and that specific arrangements between the originator and the sub-participant do not affect the essential nature of a sub-participation transaction as a financial service subject to VAT exemption. This means that investment funds that up to now have paid VAT on such transactions can apply for a refund of the tax overpaid.

A clearance opinion dated 17 August 2022 (case file DKP3.8082.6.2022) on reducing depreciation rates for fixed assets used in business activities conducted in Special Economic Zones was published on 5 October 2022. According to the Head of the National Revenue Administration, the above-described activities can bring a tax benefit which consists in increasing tax-exempt income throughout the period of using State aid by the Applicant, as well as reducing the taxable income after the Applicant goes beyond the limit of State aid. Nevertheless, such a benefit does not contradict the subject or purpose of tax law or its provision, and the action described by the Applicant would not be deemed of artificial character. Consequently, Article 119a(1) of the Tax Code finds no application.

During the meeting of the Monetary Policy Council held on 5 October 2022 it was decided to keep the NBP interest rates unchanged, i.e.:

  • Reference rate at 6.75%
  • Lombard loan interest rate at 7.25%
  • Deposit rate at 6.25%
  • Rediscount rate at 6.80%
  • Discount rate on bills of exchange at 6.85%

Changes to the reference rate affect other financial parameters, e.g. the amount of interest on tax arrears (200% of the basic Lombard loan interest rate + 2%, except that the rate may not be lower than 8), which now amounts to 16.5% on an annual basis as well as the limit of notional costs of external financing and of a reduction in the amount of tax liability in the event of payment of VAT in full from a VAT account earlier than the deadline for paying the tax. 

On 3 October 2022, third Co-operative Compliance Agreement was signed by the Head of National Revenue Administration. The Agreement was entered into with Egger Biskupiec sp. z o. o. Taxpayers enrolling in the Program gain the possibility to enter into agreements on the interpretation and application of tax law, compliance with appropriate terms in transactions with related entities or the amount of income tax advance payments required. Furthermore, participating entities may take advantage of interest relief. Moreover, participation in the Program brings image-related benefits. The Co-operative Compliance Program is intended for business entities with revenue of above EUR 50 million.

On 20 September 2022, a treaty on the elimination of double taxation in the field of income taxes and the prevention of tax evasion and avoidance, including a Protocol thereto, were signed between Poland and Brazil in New York. This is the first treaty of this kind ever signed between the two states and it considers the Polish policy of combating tax fraud consisting in limiting the possibility of using double taxation treaties for aggressive tax planning. The treaty now awaits ratification by the parties.

In its ruling dated 4 October 2022 (case file II FSK 298/20), the Supreme Administrative Court pronounced itself in the case of a company organizing competitions for users of its platform, where the participant had to perform a specific task. Once the task was fulfilled and other competition-related conditions were met, the user was granted an award, such as discount coupons in the form of vouchers and gift cards. The company was not sure whether such awards, once granted, should be treated as the competition winners’ revenue. According to the Court, discount coupons granted to taxpayers should not be perceived as increasing the value of taxpayers’ assets (decreasing their liabilities) of final and biding characters, which is a necessary condition for recognizing a given benefit as revenue within the meaning of Article 11(1) of the PIT Act. Consequently, reception of awards in the form of discount coupons and codes exchangeable for tickets the value of which is expressed as amounts shall not be treated as leading to generation of revenue by competition participants under the indicated provision.

In its ruling dated 29 September 2022 (case file I FSK 1047/21), the Supreme Administrative Court pronounced itself in the case of a company operating as a subcontractor of a General Contractor of photovoltaic farms. According to the Court, construction of a photovoltaic farm by a subcontractor, design services as well as repair and maintenance services shall be treated as separate in relation to the main service, i.e., installation of the farm. The same goes for building an internal dirt road and installation of a fence. This is because, from the technical point of view, it is not required that the road construction service or the fence assembly service must be performed each time by the same entity that provided the main service. Consequently, performance of services consisting in road construction and fence installation shall be each time subject to reverse charge VAT.