KPMG Weekly Tax Review 03 APR - 10 APR 2023

On 03 April 2023, assumptions of a bill amending certain acts to improve legal and institutional environment for business were announced.

The key assumptions of the bill are:

• simplifications at every stage of establishing and running a business, i.e., from its start and development to its succession;
• amendments to business law-making regulations;
• reduction of the number of unnecessary and excessive regulatory requirements to generate time and cost savings for citizens and businesses;
• faster and more efficient administrative procedures to improve effectiveness of public administration.

The bill is expected to be passed by the Council of Ministers in Q2 2023.

On 04 April 2023, it was announced that the Head of the National Revenue Administration issued a clearance opinion on transforming a sole proprietorship into a single-member private limited liability company (case file DKP1.8082.6.2022).

As a result of the transformation, the limited liability company was to take over the sole proprietorship’s assets and assume its rights and obligations. Once transformed, the company was to be responsible for developing particular assets of the sole proprietorship and act as a holding entity.

The Head of the National Revenue Administration stated that the above-described activities do not meet statutory criteria of tax avoidance. Consequently, Article 119a(1) of the Tax Code finds no application.

In its judgment dated 04 April 2023 (case file II FSK 2864/20), the Supreme Administrative Court pronounced itself in the case of a company which entered into a contract for acquiring advertisers with a related entity.

The company was not sure whether the costs of remuneration for such services was subject to the limit on the costs of intangible services, as stipulated by Article 15e of the CIT Act in its former wording in force until 01 January 2022.

The Court stated that the contract for acquiring advertisers is a kind of agreement of result. This means that the taxpayer does not pay for advertising services, but for an effect in the form of acquiring a client.

Thus, the cost of commission payable to the service provider is not subject to limits under Article 15e(1) of the CIT Act, because of the scope of the service provider’s performance.

In the general ruling dated 30 March 2023 (case file DD3.8203.1.2023), the Minister of Finance stated that paying by the remitter of overdue social security and health insurance contributions for employees or contractors or former employees or contractors does not generate any revenue for the latter, nor should it be treated as a free-of-charge performance for their benefit. In fact, the remitter does not have to notify the taxpayers of such payments being made and the related costs cannot be treated as tax-deductible.

On 06 April 2023, a draft decree of the Minister of Finance on the Binding Rate Information (BRI) template was published.

The draft decree specifies the new template for the BRI, adapted to amendments to the regulations on the service of letters and to the provisions of the VAT Act. The currently assessed bill amending the act on value-added tax and certain other acts provides, inter alia, for abolition of the fee for applying for a binding rate information and extending the group of entities authorized to apply for it. The decree is expected to enter into force on 01 July 2023.

In its judgment dated 30 March 2023 (case file II FSK 2384/20), the Supreme Administrative Court pronounced itself on whether the expenses related to organizing an event to mark the opening of a new seat of the taxpayer should be treated as tax-deductible costs.

According to the Court, regardless of the time of the event, the related expenses, such as renting a conference room, serving meals and drinks, as well as the costs of advertising, are tax-deductible.

In turn, expenses related to, inter alia, trips to the museum for persons from outside the company or the costs of artistic performances should be treated as costs of representation and as such do not constitute tax-deductible costs.

The list of reliefs and allowances that may be applied by taxpayers includes the thermal modernization relief. The relief is granted to taxpayers who own or co-own single-detached dwellings and who incurred the costs of thermal modernization or refurbishment, as specified in a relevant list and documented with invoices. To use the relief, the taxpayer must accomplish the thermal modernization and refurbishment works within the three subsequent years, counting from the end of the tax year in which the first expense related to such works was incurred. The deducted amount cannot exceed PLN 53,000.

Thermal modernization consists in:

• any improvement which reduces the energy demand for heating buildings or domestic hot water;
• any improvement, as a result of which there is a reduction of primary energy losses in local heating networks and the heat sources supplying them, provided that the dwellings to which the energy is delivered meet the energy saving requirements set out in the construction law, or measures have been taken to reduce the consumption of energy supplied to these buildings;
• elimination of local heat source and connection to a centralized source, resulting in cost reduction;
• total or partial replacement of energy sources with renewable or co-generation sources.