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:
During the meeting of the Monetary Policy Council held on 07 December 2022, it was decided to keep the NBP interest rates unchanged, i.e.:
- reference rate at 6.75% annually;
- lombard loan interest rate at 7.25% annually;
- deposit rate at 6.25% annually;
- rediscount rate at 6.80% annually;
- discount rate on bills of exchange at 6.85% annually.
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 05 December 2022, draft decrees of the Minister of Finance amending the decrees on transfer pricing reporting related to corporate income tax and personal income tax were published on the Government Legislation Centre’s website.
The key goal of the amendments is to adjust the existing regulations because of repealing the provision on disclosure of information on the so-called indirect haven transactions. Consequently, references to the aforementioned provision made in the decrees will be removed with retroactive effect. New provisions are to enter into force the day they are promulgated.
At the beginning of December, the long-awaited first positive opinion of the Anti-Tax Avoidance Council dated 30 September 2022, expressed in Resolution No. 8/2022, was published. The decision related to the step-up of a trademark and real property made by entities belonging to the same group. According to the Council, the activities performed by the taxpayer brought a tax benefit in the form of reduced tax liability, however, the Council believes that the taxpayer’s actions were not primarily aimed at obtaining a tax advantage (the taxpayer put forward an expert opinion which showed that the main purpose of the transaction was to change the structure of the group together with obtaining additional financing for the investment). Because the existence of a business purpose was proved, the Council confirmed that the taxpayer’s activities were not of artificial nature.
As a result, there are no prerequisites for applying Article 119a of the Polish Tax Code (the Tax Avoidance Clause).
In its judgment dated 06 December 2022 (case file II FSK 935/20), the Supreme Administrative Court pronounced itself in the case of a company employing individuals working at the company’s seat, but also in offices in other locations. Employment contracts of such individuals do not provide for how long they should work in a given location. The company reimburses or incurs the costs of travel and accommodation born in relation to temporary performance of duties in locations specified in the contracts. However, such trips cannot be treated as business travels within the meaning of the Labour Code. According to the Court, expenses of such nature incurred for employees (excluding mobile workers) should be treated as employees’ revenue under Article 12(1) of the PIT Act and, consequently, subject to income tax, on which the remitter is obliged to withhold a tax advance.
On 08 December 2022, the CJEU issued a ruling in Case C 378/21 on interpretation of the Council Directive on the common system of value added tax.
The case at hand related to a company which erroneously applied an excessive VAT rate to the services it provided. Having realized that the statutory rate of VAT applicable to its services should be lower, the company adjusted its VAT return so that the excess VAT would be credited to it by the tax authorities. The tax authorities refused to accept the adjustment because, under national law, the appellant in the main proceedings is required to pay the higher rate of VAT on account of the failure to correct its invoices. Moreover, the authorities noted that since the customers of the appellant in the main proceedings bore the cost of the higher rate of VAT, the adjustment sought would result in the appellant being unjustly enriched.
As a result, the CJEU held that the taxable person who has supplied a service and who has stated on the invoice an amount of VAT calculated on the basis of an incorrect rate is not liable for the part of the VAT invoiced incorrectly if there is no risk of loss of tax revenue on the ground that the recipients of that service are exclusively final consumers who do not have a right to deduct input VAT.
In its annual report, “VAT GAP in the EU – Report 2022”, the European Commission showed preliminary data on the VAT gap in EU countries.
According to the report, in 2020, the VAT compliance gap of Poland decreased to 11.3 percent, meaning a drop by 1.4 pp compared to 2019. Moreover between 2016 and 2020, the gap decreased by over 9 pp. This means that Poland recorded one of the fastest increases in VAT compliance in the EU between 2016 and 2018. According to the document entitled “Convergence Program: 2022 Update”, the estimated VAT gap in Poland in 2020 amounted to 10.4% (meaning that the EC-estimated gap it slightly higher, by 0.9 pp) and in 2021 - according to national estimates - it dropped to 4.3%.
On 06 December 2022, the Council of the European Union, acting on a proposal from the Commission, authorized Poland to continue to apply the 50% restriction on the right to deduct input VAT on certain vehicles until 31 December 2025.
As noted by the Council in its decision: “The application of the special measures beyond 31 December 2022, will only have a negligible effect on the overall amount of tax revenue of Poland collected at the stage of final consumption and will not adversely affect the Union’s own resources accruing from VAT.”
Draft tax clarifications regarding statements and applications influencing the amounts of personal income tax advances (hereinafter: advances) calculated and withheld by PIT remitters were published on the Ministry of Finance’s website. The clarifications provide general explanations related to entities acting as PIT remitters and the types of statements and applications, along with the effects thereof. The clarifications consider the legal status in force from 01 January 2023, including provisions of Articles 31a, 31b and 31c of the PIT Act, brought by the Act of 09 June 2022 (Polish Deal 2.0) and apply to income earned in 2023. At the same time, it was announced that consultations in this regard had begun and will end on 15 December 2022.