Welcome to the next issue of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.
On 17 October 2023, the Council of the EU added Antigua and Barbuda, Belize and Seychelles to the EU list of non-cooperative jurisdictions for tax purposes. At the same time, three jurisdictions were removed from the list: British Virgin Islands, Costa Rica and Marshall Islands. With these updates, the EU list consists of 16 jurisdictions. In addition to the list of non-cooperative tax jurisdictions, the Council approved the usual state of play document.
On 18 October 2023, the Constitutional Tribunal rendered judgment in case SK 23/19 regarding real estate tax on parking space situated in a residential building. The Tribunal held that subjecting parking space in multi-dwelling buildings with a separate land and mortgage register to a different real estate tax rate than in the case of a garage not under separate ownership leads to unequal treatment of taxable persons. The challenged provisions lose their legal effect on 31 December 2024.
In its judgment dated 12 October 2023 (case file II FSK 327/21), the Supreme Administrative Court held that Article 93a(10(2) of the Polish Tax Code prevents double taxation of profits from income earned before re-registering a natural person’s sole proprietorship as a private limited company (sp. Z o.o.)
In fact, the re-registered company’s distribution of funds acquired as a result of reducing the share capital composed of profits gained before the re-registry is fiscally neutral, since these funds have already been taxed.
On 12 October 2023 (case file II FSK 397/22), the Supreme Administrative Court delivered judgment in the case of a band which entered into a contract for using private cars for business purposes with its members. To reimburse its members for expenses related to using vehicles, the band provides them monthly with a lump-sum payment. The band wanted to know whether the compensation paid as a reimbursement of employee expenses was the members’ revenue under the employment contract. According to the Court, the consideration in the form of reimbursement of cost of using private vehicles for business purposes, namely, local transportation, paid out to the members should be treated as employees’ revenue under Article 12(1) of the PIT Act, and as such taxed jointly with revenue from employment relationship. Moreover, with regards to the consideration paid, the band should act as a remitter in line with Articles 31, 32, and 38 of the PIT Act.
On 12 October 2023, a notice of denying a clearance opinion by the Head of the National Revenue Administration (NRA) was published. The application related to the possibility of starting a trust foundation in the Netherlands in which assets of a Polish tax resident were supposed to be placed. According to the Head of the NRA, the objectives presented by the Applicants were not the primary purpose behind performing the activity. Moreover, the Head of the NRA stated that there were reasons to assume that the tax benefits indicated in the application would be contrary to the subject or purpose of Articles 30da - 30di of the PIT Act relating to taxation of income from unrealized gains. Moreover, the modus operandi adopted by the applicants can be deemed artificial in nature, mainly because of the form of carrying out the activity, which resulted in unjustified division of operations and involved an intermediary operator despite the lack of economic justification therefor, namely because, as a result of the activities, an entity not conducting operational activities, the task of which would be only to manage the applicants' assets, would be established.
On 17 October 2023, the Council of the EU adopted a new directive amending directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8).
The amendments mainly concern the reporting and automatic exchange of information on revenues from transactions in crypto-assets and on advance tax rulings for the wealthiest (high-net-worth) individuals.
According to data made available by the Ministry of Finance, in the period from January to September this year, state budget revenues amounted to PLN 418 billion (69.5% of the estimated execution), and expenses reached PLN 452.7 billion (65.3%). Consequently, the deficit increased to PLN 34.7 billion (37.7%). The most visible surge is in revenue from VAT, which increased by 6.8% annually and amounted to PLN 181.2 billion. In September, VAT revenues increased by 9% with a nominal decline in sold production of industry in August this year (base for VAT payments in September) and a slight nominal increase in retail sales by 3.1% y/y in August. Excise tax revenues also increased (amounting to PLN 61.6 billion) to yield PLN 2.9 billion more y/y (an increase of 4.9%). CIT revenues increased by 1.9% (PLN 1 billion) and amounted to PLN 54.3 billion in total. However, PIT revenues decreased by 2.5% to amount to PLN 56.1 billion in total. According to the Ministry, this is due to the tax rate reduction of 2022.