It is 6 March 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 28 February 2023, the General Ruling of the Minister of Finance (no. DD5.8203.7.2022) on the disclosure obligation of real estate companies and taxpayers holding shares in such entities was published. The Minister of Finance noted that the disclosure obligation of taxpayers holding rights in real estate companies arises regardless of whether in the given taxable year, at the end of which the information is provided, any revenue (income) on this account was earned. This means that the fact of holding, directly or indirectly, shares in a real estate company alone triggers the disclosure obligation.
Furthermore, the Minister explained that the obligation to disclose information to the Head of the National Revenue Administration rests both with Polish tax residents and non-Polish tax residents, i.e., entities without a place of residence or registered office or place of management in the territory of Poland. Importantly, the disclosure obligation does not cover CIT-exempt taxpayers, referred to in Article 6 of the CIT Act, yet this exclusion finds no application to real estate companies as such.
On 02 March 2023, a general ruling of the Minister of finance dated 23 February 2023 (no. DD2.8202.3.2022) was published. The ruling provides insight on when accounting documents providing proof that expenses were incurred should be entered into the tax revenue and expense ledger, in the event of a posting delay.
According to the ruling, PIT Act provisions do not unequivocally state that the cost can be deducted by the taxpayer only on the day of issuing the document serving as a basis for posting that cost in the ledger. In fact, the document constituting the basis for posting (recognizing) tax-deductible cost received by the taxpayer or transferred to the accounting office at a later date may be posted (recognized) in the ledger in the month in which it was received by the taxpayer or transferred to the accounting office. This should take place by the end of the tax year in which the cost is deductible. Any later posting of the cost will not cause changing the date of incurring it.
On 01 March 2023, a notice of refusal to issue a clearance opinion by the Head of the National Revenue Administration was published. The subject of the application was a series of mutual transactions related to trademarks and intra-group payables (no. DKP3.8082.11.2022). The case at hand related to a series of activities performed by a group of companies, aimed at reorganization and purchase of trademarks. The activities perform made it possible to depreciate the initial value of trademarks, determined as their purchase price, without the limitation resulting from Article 16b(1)(6) of the CIT Act in the wording applicable in 2013. The Head of the National Revenue Administration concluded that the Applicant acted in a way to achieve a tax benefit. Importantly, gaining a tax benefit was one of the main goals behind the activities and the taxpayer’s operations were artificial in nature. Moreover, the achieved tax benefit would go against the object or the purpose of the tax act, or a provision thereof, in particular of Article 15(1) of the CIT Act in conjunction with Article 16(1)(8) thereof.
The Minister of State Assets announced that the government is now working on a new tax on windfall profits of mining and fuel companies. According to the Minister, the bill can be finalized already in March, with the proposed solutions likely to also cover the previous year. A similar idea emerged in autumn 2022, taking the form of a tax on windfall profits of large companies from all industries. The tax was to cover entities with 2022 gross profit margin higher than the average gross margin for 2018, 2019, and 2021 (excluding 2020, due to the pandemic crisis).
The Ministry of Finance announced tax consultations regarding draft tax clarifications on transfer pricing, namely: Transfer Pricing no. 6: the Cost-Plus Method. The goal of tax clarifications is to explore some practical aspects of using the cost-plus method. They cover, among others: the scope of method application, establishing the cost base and profit mark-up, as well as the criteria for comparability of transactions and entities. The consultation process is open to all interested entities. Comments, opinions and remarks to the draft, supported by detailed explanations, can be submitted until 17 March 2023.
On 01 March 2023, the Sejm’s Public Finance Committee assessed the bill amending the Act on Bonds. The Committee decided to pass the bill, including all amendments thereto, the key of which related to how family foundations should be taxed. One of the amendments approved by the Committee makes it possible for a company to continue applying the Estonian CIT scheme, even if one of its shareholders acts as a beneficiary of a family foundation. Another amendment reduces the input tax on payments made by foundations from 15% to 10%, if the recipients belong to the first or second tax group within the meaning of the Inheritance and Donation Tax Act.
The Ministry of Finance announced that in 2023 it does not plan to make any amendments to provisions on tax on income from unrealized gains. The provisions currently in force, however, raise some controversy. According to the individual rulings issued by the Head of the National Revenue Administration, an entrepreneur planning to move to Italy, whose private property includes securities worth over PLN 4 million, must pay exit tax (see individual ruling dated 03 January 2023, no. 0115-KDIT1.4011.697. 2022.1.MR). However, the exit tax would not be due on cryptocurrencies (e.g., Bitcoin), even if their value exceeds PLN 4 million. This is because cryptocurrencies do not meet the definition of “assets” within the meaning of Article 30da(3) of the PIT Act (see ruling dated 22 December 2022, no. 0113-KDIPT2-3.4011.809. 2022.1.NM). There is also the issue of tax on the disposal of private property (e.g., donations of shares in a Polish company to a foreign non-resident).
Starting from 01 January 2012, individuals may save additional funds on Individual Pension Security Accounts (IPAs). If taxpayers make payments to IPA during the year, they can deduct the amount saved from tax. The deduction cap for 2022 is: PLN 7,106.40 or PLN 10,659.60 (for individuals conducting non-agricultural business activity). The relief can be applied to income taxed according to the tax scale, with 19% flat rate or lump-sum tax on recorded revenue.
Read the next episodes of the “Weekly Tax Review”, where, until 2 May 2023, we will explore the key aspects of the 2023 PIT return season.