Welcome to the next issue of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.
On 21 September 2023, it was announced that the Head of the National Revenue Administration issued a clearance opinion on tax consequences of a merger and acquisition of companies (case file DKP1.8082.8.2022).
The transaction involved two companies belonging to the same group. Company A was to acquire Company B. The merger would take place through transferring all the assets of the acquired company to the acquiring company. Given that Company A is the sole shareholder of the acquired entity, no shares would be issued in connection with the transaction. The Head of the National Revenue Administration stated that the presented description of the planned activity gives no ground for identifying the statutory premises of artificial mode of operation. Consequently, a clearance opinion could be issued.
On 14 September 2023, the Regional Administrative Court rendered judgment in case III SA/Wa 1513/23, in which it stated that the conditions for exemption under Article 22(4) of the CIT Act can be also satisfied by an entity, which is not the immediate dividend beneficiary, but a beneficial owner thereof. This means that when, for an uninterrupted period of at least two years, a beneficial owner holds at least 10% of shares in an intermediate company, which, in turn, holds a similar share in the dividend-paying company, this beneficial owner meets the conditions for exemption.
On 19 September 2023, the Supreme Administrative Court rendered judgment in case III SA/Wa 688/23. The Court held that a company can offset losses incurred by its branch in Romania under the same conditions as those applicable to losses incurred in Poland. The right to offset such losses, however, only starts to apply when the branch is wound up, with no possibility to use it before that time. The losses can be carried forward over five subsequent taxable years, counting from the moment they were incurred by the branch.
On 16 September 2023, the decrees of the Minister of Finance amending the decrees on transfer pricing in terms of PIT and CIT entered into force.
The purpose of the decrees is, among others, to response to statutory changes regarding the so-called haven transactions, including amendments to the content of the entity's declaration on the preparation of the Local File for transactions other than controlled transactions. The decrees also remove the indicator of the share of costs of operating activities with related entities in the operating costs of the entity.
New provisions apply to transfer pricing reports for taxable years starting after 31 December 2021.
On 21 September 2023, the opinion of Juliane Kokott, Advocate General of the Court of Justice of the EU, in case C-442/22 was delivered. The Advocate General stated that Article 203 of Directive 2006/112/EC on the common system of value added tax must be interpreted as meaning that the ostensible issuer of an invoice for fictitious transactions is liable to pay the VAT entered on them only if
- the recipient of the invoice could not be refused deduction of input tax,
- the issuing of the invoice by a third party is to be attributed to him or her on account of particular responsibility (or proximity) and
- he or she did not act in good faith.
Good faith can be ruled out only where the ostensible issuer is himself or herself at fault. In the case of a taxable person, the culpably deficient selection or supervision of that person’s employees can also constitute such fault.
On 19 September 2023 (case file I SA/Wr 84/23), the Regional Administrative Court in Wrocław issued a judgement in the case of a company which received two orders for the supply of goods. The goods were delivered, but after the payment deadline for the first invoice expired, the amount due still had not been paid. After a couple of unsuccessful attempts at contacting the contractor, it turned out that a fraudster was posing as the company’s client. Consequently, the company wanted to know if a VAT-taxable delivery of goods actually took place in that situation.
According to the court, the delivery of goods to a place where they were de facto stolen, as a result of the company being misled, will not be subject to VAT. This is because the transfer of right of owner-like possession has not taken place. Consequently, since the goods were delivered as a result of fraud and, consequently, they were seized by an unidentified entity, under conditions indicating that a crime had been committed, no ITC took place.
On 20 September 2023, the OECD published public comments received on Amount B under Pillar One relating to the simplification of transfer pricing rules. On 17 July 2023, as part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS to implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the OECD invited public comments on Amount B under Pillar One. Amount B provides for a simplified and streamlined approach to the application of the arm's length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.