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Welcome to the next issue of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

Preliminary remarks to a bill amending the Polish Civil Code and the Industrial Property Law, aimed at regulating the terms of franchise contracts, were added to the list of legislative work and policies of the Council of Ministers.

The goal of the bill is to regulate franchising under private law, introduce the obligation to provide the franchisee with all relevant information in the form of a document, specify the conditions for contract termination, set a cap on contractual penalties as well as limit non-competition clauses and the possibility of establishing promissory note collateral for claims arising out of franchise contracts. According to the authors of the bill, the material regulations need to be changed because of many dysfunctions identified in franchising systems, importantly affecting business in Poland.

On 25 July 2023, the Act of 26 May 2023 amending the Act on Municipal Self-Government, the Act of Social Forms of Housing Promotion, the Act on Real Estate Trading and Management, the Capital Duty Act and certain other acts was signed by the President into law.

The new Act brings a raft of important amendments, including:

  • a new arm’s length model of payment for land sold to perpetual usufructuaries,
  • 6% capital duty (PCC) rate on the purchase of the sixth and subsequent residential premises, in one or more buildings built on a single plot of land,
  • abolition of 2% capital duty on buying second-hand real estate, if it is the buyer's first property owned.

As per the applicable rules, the essential part of the act is to enter into force 30 days after promulgation.

On 26 July 2023, the Supreme Administrative Court rendered a judgment in case II FSK 142/21, admitting that, in line with Article 30cb of the PIT Act, taxable persons willing to apply the IP Box relief must keep relevant records and distinguish costs associated with every eligible intellectual property right to determine the qualified income. If the taxable person is engaged in various projects, separate records should be kept for each of them. Consequently, where a taxable person keeps a revenue and expense ledger but indicates that they will keep records allowing for proper calculation of income from a qualified right in which they participate, they cannot be deprived of the possibility of using a preferential taxation scheme only for this reason.

A government bill amending certain acts due to development of e-administration was submitted before the Sejm. The bill brings, inter alia:

  1. amendments related to establishing the Electronic Power of Attorney Register and introducing e-power of attorney,
  2. amendments related to introducing an Integrated Analytics Platform,
  3. amendments to the Polish Tax Code, making it possible for a minister competent for digitization matters to access data from the Central Register of Tax Data and
  4. amendments to the Act on statutory auditors, audit companies and public supervision.

The National Chamber of Tax Advisors published its opinion on the amendments regarding e-administration proposed by the government making some critical remarks on provisions forcing audit firms to submit all closed audit records to the Polish Agency for Audit Oversight.

On 25 July 2023, the Supreme Administrative Court rendered judgment in the case II FSK 131/21 determining whether the face value of cash in Polish zloty included in an organized part of an enterprise should be treated as tax-deductible costs upon sale thereof. According to the Court, where an organized part of an enterprise includes cash in PLN, the value of such cash should be treated as tax-deductible costs of the seller. Given that the goal of separating an organized part of an enterprise (OPE) is to isolate assets related to a given sphere of entity’s activity, including cash related to it, the possible exclusion of these funds from the scope of OPE should be treated as an action of artificial nature that could involve the risk of losing the status of an economically independent unit by this OPE. Moreover, if the company included cash in the revenue obtained, it may deduct the costs incurred to acquire such funds. 

On 25 July 2023, the Supreme Administrative Court rendered a judgment in the case (III FSK 123/23) of a company, which in its return for 2018, understated tax due by not showing residential premises it used in business activity. According to tax authorities, the company used the residential property it owned to generate profit through lease or sale. According to the Court, residential property used in business activity should be subject to an increased tax rate under Article 5(1)(2)(b) of the Act on Local Taxes and Duties. This is because the premises being the subject of the dispute were shown in the company’s fixed asset records (which means that they constitute a part of the taxable person’s property aimed at generating business income and as such remain linked to the taxable person’s business activity), the costs associated with the maintenance of the premises were recognized for tax purposes, and the premises themselves were purchased under a loan granted by a related entity and using funds obtained from the company's business activity.

The Ministry of Finance published new drafts of PIT return forms, namely: PIT-36, PIT-36S, PIT-36L, PIT-36LS and PIT-4R, including the following annexes: PIT/B, PIT/BR, PIT/IP, PIT/M and PIT/SE. Earlier, the Ministry published drafts of return forms for taxpayers applying the lump-sum tax on recorded revenue scheme, i.e.: PIT-28, PIT-28S and PIT-28/B. The new forms will become mandatory for 2023 filings. Modifications are due to, inter alia, amendments to tax acts which repealed the obligation to attach to the annual tax return information on receivables and liabilities reducing or increasing the taxable base (loss) resulting from commercial transactions.

Consultations regarding new PIT-36, PIT-36S,PIT-36L and PIT-36LS forms, including annexes, last until 08 August 2023. Remarks can be submitted to: Konsultacje.WzoryPIT@mf.gov.pl.

According to the judgment of the Supreme Administrative Court dated 28 July 2023 (case file II FSK 174/21), in order to qualify revenue as revenue from other sources, one must first make sure that it is not possible to classify such revenue under sources enumerated in Article 10(1)(1-8) of the PIT Act. In this case, given that it is clear that the performance is granted as part of the business activity pursued by the taxable person, the resulting revenue should be classified accordingly. In other words, only prizes granted to competitors being natural persons not conducting non-agricultural business activity should be treated as revenue from other sources as referred to in Article 20(1) of the PIT Act. Consequently, only the revenue from prizes granted to competition winners, i.e., natural persons not conducting non-agricultural business activity should be subject to 10% lump-sum income tax under Article 30(1)(2) of the PIT Act.

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