The Polish Ministry of Finance (MoF) has just polished an extensive amendments to the CIT which are aimed to enter into force in 2019. According to MoF, the main purpose of the new regulations is to simplify and tighten up income taxes. Although not all proposed amendments can be considered taxpayer friendly.
The proposal is quite substantial as it covers 155 pages of new provisions (these cover not only CIT but also PIT and Tax Ordinance Act).
The amendments has been now submitted to public consultation with a 14-day deadline for comments. Although the draft may be subject to changes during the legislative process, it is expected that most of the proposed changes will be implemented.
Given the volume of proposed amendments, below we summarize only the most significant changes and solutions that might impact on your Polish CIT obligations.
Exit tax – leaving Poland can be pricey
As of 2019, taxpayers who transfer their assets out of Poland will have to pay 19% of a so-called exit tax. The taxable basis will be calculated as a sum of income from unrealized gains per individual assets (surplus of a market value over tax value of a given asset), even if the assets will be viewed as a going concern. The proposed changes have their source in EU Directive on tax avoidance practices (“ATAD”) and are an effect of its implementation.
WHT – pay it now, get back later
The proposed amendments introduce also new rules on WHT payment on royalties, interest and dividends. The current rules that allow taxpayers to apply a preferential rate or exemption under a relevant double tax treaty or CIT provisions without prior verification, will no longer be valid for yearly payments in excess of PLN 2 million per recipient. Under the new rules, in such cases the Polish taxpayer (a remitter) will have to pay WHT upfront. Only then, upon request, the tax authorities will refund the WHT, once they confirm that a preferential rate / exemption should be applied. The tax authorities will have 6 six months for the refund.
Company cars - only partially tax deductible
As of 2019 if a company car will be used not only for business purposes (i.e. also employee’ private purposes), the company will be allowed to deduct only 50% of car related costs. Full deduction will be allowed only if a car is used exclusively for business purposes and taxpayer fulfills strict formal procedures on the car’s usage (likewise in the case of input VAT deduction on company cars).
Innovative businesses pay only 5% CIT
The draft regulations introduce also a preferential tax rate (5%) on income derived by businesses who receive revenues from commercialization of intellectual property rights created or developed by them (so-called ‘Innovation Box).
Bitcoin income subject to 19% CIT
According to the project, revenues derived from virtual currencies (such as Bitcoin) will be subject to 19% tax rate (currently they are not in the scope of CIT regulations). The revenue however will not be combined with revenues from other sources or even other capital gains.
Obligatory disclosure of tax schemes
The new provisions introduce also an obligation for tax and legal advisors to provide tax authorities with an information regarding tax schemes implemented by their clients (Mandatory Disclosure Rules). The first information in this respect will have to be provided to the tax authorities by 31 March 2019 and will cover schemes made available or implemented in the second half of 2018. The proposed change has its source in ATAD Directive and is an effect of its implementation.
How can we support you?
Taking into account the scope and gravity of these amendments, we recommend analyzing possible impact of these new rules on your business and considering any necessary adjustments. Please contact our tax department directly if you need any further information in this respect.
Matthew O’Shaughnessy
Head of Tax
E: moshaughnessy@asbgroup.eu
Piotr Marchlewski
Tax Manager, Tax Advisor
E: pmarchlewski@asbgroup.eu