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It is 29 May 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 23 May 2023, the Ministry of Finance announced the launch of tax consultations to assess maturity of the Tax Control Framework (TCF) and on good practices in TFC maintaining. 

TFC is a set of guidelines providing instruments and tools supporting effective supervision over tax processes in companies, which must be implemented to apply for participation in the Cooperative Compliance Program, being a form of close and ongoing cooperation between the taxpayer and the Head of the National Revenue Administration.

The purpose of the tax consultations is to develop, in cooperation with taxpayers and other stakeholders, a model for assessing the TCF maturity level. The results of the consultations will contribute to creation of a manual for the participant of the Cooperative Compliance Program setting forth good practices in TFC.

On 23 May 2023, the Ministry of Finance announced pre-consultation on directions in tax transparency development. The goal thereof is to provide space for substantive discussion on preparing and executing tax strategy, informing the public and fiscal authorities on how the strategy is deployed, as well as assessing the credibility of information disclosed. The results of the consultations will contribute to charting a course for further development of practices related to maintaining a tax strategy and disclosing related information. The pre-consultation is open to all interested entities. Comments and opinions can be submitted until 02 June 2023. 

On 23 May 2023, the Ministry of Finance published a new version of the FA(2) logical structure to become binding on 01 September 2023.

According to the Ministry, the updated FA(2) logical structure was developed drawing from comments and opinions submitted during the tax consultation stage and the suggestions coming from entities during meetings with organizations of entrepreneurs, accountants and statutory auditors as well as from the IT sector. The new logical structure will be made available on ePUAP in June 2023. A test environment adapted to the logical structure, along with relevant documentation, will be made available in July 2023, while the production environment is expected to become available on 1 September 2023. Consequently, on 1 September 2023, the new logical structure FA(2) will replace the currently used FA(1) logical structure.

On 25 May 2022, the Ministry of Finance published a draft decree on determining the value of items and property rights that are free of or exempt from inheritance and donation tax and the tax scales according to which this tax is calculated. The draft decree provides for new exemption thresholds where the items or funds being the subject of donation within 12 months from their acquisition are used to cover building or housing contribution provided to a housing cooperative, construction of a single-family house, purchase of residential premises constituting a separate real property or repayment of a mortgage-secured housing loan, including interest. Moreover, the draft decree would raise thresholds over which items or property rights acquired from a single person become taxable. A new tax scale in inheritance and donation tax is also proposed. The decree is to take effect on the day following its promulgation.

On 24 May 2023, the Act amending the Value-Added Tax Act and Certain other Acts, tightening up the VAT collection system in e-commerce, was published in the Polish Journal of Laws. Pursuant to the Act, banks and other financial institutions must maintain, store, and send records on selected payments to the Head of National Revenue Administration, where the payment service provider makes more than 25 cross-border payments to the same payee in a quarter. The collected records will be stored by the Head of the National Revenue Administration and sent to the EU central electronic system of payment information (CESOP). The system will collect data from Member State administrations to create a comprehensive database of all cross-border transactions both within the Union and with third countries, which individual Member States will be able to use under strictly defined rules. The new regulations are to enter into force on 01 January 2024.

On 22 May 2023, the Act on family foundations of 26 January 2023 entered into force. Pursuant to the Act, since the family foundation income of the founder and beneficiaries is subject to PIT, it will not be liable to inheritance and donation tax. Performances made to a natural person as a result of the foundation’s dissolution will be subject to PIT, the amount of which will depend on the degree of kinship between the beneficiary and the founder. Only a portion of performances made to the founder or their relatives belonging to the closest kinship group as a result of the foundation’s dissolution will be exempt from personal income tax. It will correspond to the proportion appropriate for this founder specified in the inventory of property. Moreover, family foundations were covered by CIT exemption. However, no exemption will be available in income tax on performances made by the foundation to the beneficiary or the founder, as well as on property transferred in connection with the dissolution of the family foundation. Moreover, the above-mentioned exemption will not apply to family foundations conducting business activity other than economic activity allowed under the provisions of the Act on Family Foundations.

On 25 May 2023, the CJEU issued a judgment in the case C-114/22 relating to a Polish company acquiring trademarks. During the inspection, the authority decided that the company had no right to deduct VAT because of the fictitious character of the transaction. The case was submitted before the Supreme Administrative Court (SAC), which referred it to the CJEU for a preliminary ruling. The SAC wanted to know if the Polish regulations prohibiting deduction of VAT on fictitious transactions, regardless of whether the right is being relied on for fraudulent or abusive ends, were compatible with EU law.

The CJEU noted that that the right of deduction is, in principle, subject to proof that the transaction has actually been carried out. The right of deduction arises only when the goods are delivered, or the services are performed. Consequently, the national court must ascertain whether the assignment of marks was actually carried out and whether the marks concerned were used by the taxable person for the purposes of taxed transactions. Therefore, if the substantive conditions for the right of deduction are met, the national authorities cannot refuse the company the right of deduction. This is because EU law does not allow for calling into question the right to deduct VAT on only because the tax office considered the transaction that actually took place to be fictitious. 

Poland’s and United Arab Emirates’ Ministers of Finance met in Abu Dhabi to sign a joint declaration on deepening tax cooperation. Entering into this agreement will facilitate closer contacts and initiate collaboration between the public administrations of both countries. Consequently, Poland and the UAE will share knowledge, experiences, and best practices in digitizing their respective tax systems. This includes, inter alia, requirements related to digital reporting, big data analysis, machine learning, and the adoption of new technologies (such as blockchain) in the public sector.

On 26 May 2023, the Lower House of the Polish Parliament passed amendments to the SLIM VAT 3 package. The Act amending the Value-Added Tax Act and Certain other Acts is now to be signed by the President. The Act brings a raft of solutions for further simplification and acceleration of VAT settlements, including amendments related to other taxes, such as income tax and inheritance and donation tax. The Act increases (from EUR 1.2 million to EUR 2 million) sales value threshold below which entities are treated as “small taxpayers”, sets out rules for determining the conversion rate for correcting invoices in the event that the invoice was issued in a foreign currency, and brings new regulations to reduce formalities in international trade. Moreover, the formal requirement to hold an ICA invoice when deducting input tax on this account is to be revoked. Other amendments brought by the act include changes in lump-sum taxation of revenue earned by spouses from private lease. Spouses will now have to apply a higher lump-sum tax rate of 12.5% of revenue after exceeding the threshold of PLN 200,000 (the current threshold is PLN 100,000).Moreover, the Act imposes the obligation to submit standard audit files (Polish: JPK) on individuals conducting business activity and companies. Most importantly, the Act amends the date on which the obligation to submit the files including data on income taxes comes into effect - in the case of JPK CIT, the obligation will come into force on 31 December 2025, and in the case of JPK PIT - on 31 December 2026. Finally, the Act provides for the possibility of compensating loss in investment funds with earnings from shares. The essential part of the new regulations is to enter into force on 01 July 2023.

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