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 14 December 2022, the Lower House of the Polish Parliament passed the Act on Family Foundations. The goal thereof is to introduce a new category of entities into the Polish regulatory framework, i.e., family foundations, the task of which will be to achieve the goals set by the founder, based on the property owned, which can be secured against loss. The bill now moves to the Upper House of the Polish Parliament. New regulations on family foundations are to enter into force 3 months after promulgation. 

On 13 December 2022, a clearance opinion dated 02 December 2022 on share swapping and a cross-border merger with a Maltese company (ref no. DKP1.8082.4.2022) was published. According to the Head of the National Revenue Administration, even though the activities performed by the taxpayer can bring a tax benefit in the form of non-occurrence of a tax liability under the Acts on PIT, CIT, and Capital Duty (as a result of Cross-Border Merger preceded by a Share Swap), it is not the primary or one of the primary purposes behind performing them, since the core purpose thereof will be to transfer the company’s investment and holding activities to Poland and to enable adjusting the form and place of performing the partners’ activities to the designated investment assumptions on the territory of Poland. Moreover, performing such activities does not contradict the subject or purpose of tax law nor any of its provisions, and the action described by the Applicant would not be deemed of artificial character.

As a result, the activities described in the Application do not meet the statutory criteria of tax evasion.

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).

On 12 December 2022, EU member states reached agreement to implement the minimum level of taxation for largest corporations (known as Pillar 2 of the OECD’s BEPS).

According to the arrangements, the minimum tax will be levied on the profit of the large multinational and domestic groups or companies with a combined annual turnover of at least EUR 750 million at a minimum rate of 15%.

The directive has to be transposed into member states’ national law by the end of 2023.

In its judgment of 08 December 2022 (case C-694/20), the CJEU stated that a lawyer does not have to notify of their client’s tax-planning any fiscal authorities, nor any other participants thereof, where the reporting obligation would breach the legal professional privilege. The judgment was issued in relation to the inquiry made by the Constitutional Court of Belgium, yet it may have a significant impact on the further developments regarding MDR regulations throughout the European Union. 

In its judgment dated 13 December 2022 (ref. no. II FSK 1155/20), the Supreme Administrative Court pronounced itself in the case of a taxpayer who bought an undeveloped plot categorized as orchards and permanent pastures, applied for a zoning decision, incurred expenditure on the plot, and then wanted to sell it on their own behalf.

According to the Court, in the case at hand, there are no grounds for qualifying activities undertaken by the taxpayer falling within the ordinary management of their own assets as non-agricultural economic activity. Activities performed in compliance with the rules of economy, which are normal in such cases, should not be equated with economic activity. It is difficult to expect an entity that sells an asset not to be guided by economic calculations and refrain from actions that will allow it to obtain the highest possible price. In fact, obtaining a zoning decision and a building permit or publishing an online advertisement cannot be perceived as professional activities specific only to entities professionally engaged in real estate trading.

In its judgment dated 08 December 2022 (ref. no. II FSK 1132/20), the Supreme Administrative Court pronounced itself in a case of a taxpayer whose counterparty decided to apply the contractual penalty for delayed contract implementation provided for by the contract.

According to the Court, the provision of the PIT Act under which contractual penalties are excluded from tax-deductible costs relate to instances of defects in the supplied goods, including performance of a service as part of the business. This means that any defect of the service serves in this case as a basis for excluding contractual penalties from tax-deductible costs. Consequently, the provision does not pertain to instances of delayed contract performances. The possibility of classifying the contractual penalty for delayed performance of the service as tax-deductible costs should be considered against the background of the general provision relating to the possibility of qualifying as tax-deductible costs such expenses that have a causal relationship with the revenue obtained by the taxpayer.

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