It is 6 February 2023. 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 27 January 2023, the President signed the Act of December 2021 amending the Polish Labour Code and certain other acts.
According to the amended provisions, remote work shall mean work rendered fully or partially in a place indicated by the employee and each time approved by the employer. Importantly, the new rules provide for the possibility of rendering remote work on an occasional basis. It will be available at the employee’s request (subject to the employer’s approval) but cannot exceed 24 days annually. This form of flexible working will not be subject to remote working provisions, meaning employers will not be obliged to provide employees with relevant materials and work tools.
Moreover, the amendment to the Labour Code brings the possibility for employers to subject their employees to a sobriety test. An important change is also the statutory prohibition of admitting to work an employee who is intoxicated or under the influence of drugs. The essential part of the new provisions is to enter into force 14 days after publication of the act in the Polish Journal of Laws.
On 02 February 2023, the Ministry of Finance presented initial conclusions from public consultations regarding the bill introducing e-invoicing as a universal billing system in Poland.
The key amendment pertains to postponing the entry into force of the mandatory National e-Invoicing System (NeIS) [Polish: Krajowy System e-Faktur] from 01 January to 01 July 2024 (01 January 2025 for personally exempt taxpayers) and excluding consumer invoices from the scope of mandatory e-invoicing. Possible penalties are going to be relaxed and will become applicable only from 01 January 2025. Be reminded that the obligation to issue e-invoices via NeIS will apply to all taxpayers having their seat or fixed base in the territory of Poland.
The Act of 29 October 2021 amending the Act on personal income tax, corporate income tax, and certain other acts (commonly referred to as the Polish Deal program) brought important modifications to Article 15(6) of the CIT Act. This, however, gave rise to doubts as to whether real estate companies which for accounting purposes present real estate as investments at fair market value and do not make depreciation write-downs thereof, can - for tax purposes - recognize the value of tax depreciation write-downs as tax-deductible costs.
On 31 January 2023 and 01 February 2023, Regional Administrative Courts in Poznan and Warsaw issued favourable judgments (case files I SA/PO 752/22, III SA/WA 1788/22, III SA/ WA 2356/22 and III SA/Wa 2355/22) declaring that the provisions on tax depreciation limits being in force as of 2022 for real estate companies are applicable only where real estate is treated, from accounting perspective, as fixed assets subject to depreciation. Importantly, this limitation cannot be understood in a broad sense, as the tax authorities have tried to demonstrate.
The administrative courts supported the Applicants' position.
The administrative courts supported the Applicants' position.
On 26 January 2023, the Lower House of the Polish Parliament passed an act amending certain acts to remove unnecessary administrative and legal obstacles, bringing changes, inter alia, to inheritance and donation tax regulations. Importantly, according to one of the newly introduced provisions, any individual who receives donations from strangers in the amount exceeding PLN 54,180 within five years shall pay the tax on inheritance and donations (previously, similar provisions related to the amount of a single payment). The tax would be set at 12-20% of the amount, depending on the total value thereof. This, however, would importantly affect fundraiser beneficiaries.
Given the controversy, on 01 February 2013, an announcement was made that the cap on donations was introduced to prevent potential infringements yet works on provisions clarifying this solution are underway. New regulations were to enter into force already on 01 July 2023, but the act is still assessed by the Senate, meaning that the Ministry has time to put forward relevant amendments.
The schedule for the European Funds for a Modern Economy Program (Polish: Fundusze Europejskie dla Nowoczesnej Gospodarki, FENG) was announced on 20 January 2023.
More than 40 calls for proposals are scheduled for the first year of EU MFF 2021-2027 funds distribution. The first calls are to be launched as early as February 21. The FENG program is a successor to the Smart Growth Program and its most popular competitions, offering support for establishing R&D centres, conducting R&D works (the so-called Fast Track program) and promoting innovation in various sectors, available to companies between 2014 and 2020. The program aims to further develop the potential of the Polish economy in research and innovation and the use of advanced technologies. The amount of funds scheduled for distribution in 2023 is estimated at 60% of the program’s total budget, i.e., EUR 4.7 billion. Entities interested in obtaining support should immediately start working on developing concepts for projects planned to be submitted as part of applications for funding.
On 31 January 2023, the Supreme Administrative Court issued judgments (case files I FSK 582/22, I FSK 129-131/22, I FSK 427/22, I FSK 506/22 and I FSK 1282/22), according to which agronomical and agrobiological agents that do not meet the criteria of the “fertilizer” definition given by the relevant acts benefit from a reduced VAT rate under item 10 of Schedule 3 to the VAT Act.
Importantly, in the oral statement of reasons, the Court considered it admissible to rely on external systemic interpretation, i.e., other provisions, but only if the resulting interpretation is not to the detriment of taxpayers. In the case at hand, the Court stated that it was inadmissible to refer to the definition of fertilizers provided by the relevant regulations.
The Court also emphasized that although the application of preferential VAT rates should be subject to strict interpretation, it may not lead to narrowing it, based on prerequisites not resulting from the tax law. Consequently, if the new VAT matrix does not clearly state what items should be covered by the reduced rates, the scope thereof should be interpreted in taxpayers’ favour.
In the judgment dated 31 January 2023 (case file III FSK 1556/21), the Supreme Administrative Court held that where a taxpayer handed over the management of a real property and that real property remains in the possession of the manager, or - under concluded contracts - the manager rented or leased that real property, the real property shall be perceived as being in the possession of an entity conducting business activity. Consequently, the taxpayer acts as an entrepreneur, meaning that the real property they hold must be subject to tax rates applicable to real property used in business activity.
According to the Court, the very method of managing real property, along with the fact of outsourcing related services to third parties, without the taxpayer’s involvement, testify to the fact that the taxpayer conducts a profit-oriented business (in the form of renting and leasing real property).
This view is shared by the Minister of Finance, as demonstrated in her reply to the inquiry no. 37882. This approach applies to premises rented out within the frames of the conducted business activity. Natural persons renting residential premises under the so-called private (non-business) rentals continue to pay the tax rate applicable to residential premises.
In its judgment dated 27 January 2023 (case file II FSK 1461/20), the Supreme Administrative Court held that assumption of rights to a subsidiary means that if at that moment this subsidiary incurred eligible costs in the amount not exceeding PLN 3 million and, as a consequence, it was entitled to credit this amount to tax-deductible costs in accordance with Article 15e(12) of the Act, the company is also entitled to treat this amount as tax-deductible costs.
However, the Court did not agree with the company that the merger of the company with its subsidiary should result in an increase of the limit calculated (after the merger) by the company by PLN 3 million each time (as a right derived from Article 15e(12) of the CIT Act, which the company assumed), even if the subsidiary, at the moment of assumption of rights therein by the company, incurred lower costs than the costs permissible under Article 5e(12) of the CIT Act.
On 24 January 2023, the Government passed the Slim VAT 3 package, now to be assessed by the Sejm. In the meantime, in response to a press inquiry, Paweł Selera, head of the VAT department at the Ministry of Finance, announced the new Slim VAT 4 package. The details remain unknown but works on the new package would start in 2024.