Poland

Corporate - Significant developments

Last reviewed - 10 June 2022

Changes in corporate income tax (CIT)

Obligation to prepare and publish information on the execution of tax strategy 

On 1 January 2021, a new obligation to prepare and publish information on the execution of tax strategy entered into the force. Taxpayers have 12 months after the end of the tax year to publish certain information on their website and submit the website address to the tax office.

The obligation will apply to taxpayers whose revenues exceeded EUR 50 million in a tax year and tax capital groups. The regulations provide a fine of up to PLN 250k for failure to comply with this obligation.

Taxpayers shall prepare and disclose information on, inter alia,: 

  • the approach to processes and procedures on managing obligations arising from tax regulations and ensuring their proper execution
  • the number of submitted reports on tax schemes (under mandatory disclosure rules [MDR]), separately for each tax, and
  • transactions with related entities, the value of which exceeds 5% of the total assets on the balance sheet (based on the Statutory Financial Statements),
  • tax settlements in countries applying harmful tax competition,
  • restructuring activities planned or undertaken by the taxpayer,
  • submitted applications for an individual tax ruling, binding VAT rate information and binding excise information;
  • voluntary forms of cooperation with the National Fiscal Administration.

The bill does not indicate which fiscal year is the first to be reported. However, the Ministry of Finance (MoF) explained that taxpayers are required to prepare and publish information for the year 2020 by 31 December 2021.

Optional tax rules (so-called 'Estonian CIT')

From 2021, a new system of taxation of capital companies was introduced into the Polish legal system - the so-called “Estonian CIT”. Estonian CIT changing the moment of tax payment. Currently, entities pay CIT on the income earned in a given tax year. In the Estonian CIT model, the tax will be paid only when the income is distributed, e.g. in the form of a dividend. From 2022 the Polish Deal brings important amendments with regard to the scope and application of the lump-sum scheme of Estonian CIT.

The law is addressed to capital companies that meet the i.a. following criteria:

  • the scheme can be used by  joint-stock companies, limited liability companies, limited partnerships, and limited joint-stock partnerships,
  • the shareholders are exclusively natural persons,
  • have no shares in other entities,
  • company employs, apart from the shareholders, at least three employees on the basis of an employment contract (or incur monthly salary expenditures in the amount of at least three times the average monthly salary),
  • Passive income does not exceed operating income 50% of all company revenues obtained from its activities in the previous tax year, calculated including the amount of VAT due

The lump sum on income is paid at the moment of the payment of profit and in a different amount than the standard CIT. For small taxpayers and for taxpayers starting business activity on these principles, it is 10% of the tax base. In the case of other taxpayers, it is 20% of the tax base.

Minimum income tax

As of 1 January 2022 a ‘minimum income tax’ for taxpayers on all entities subject to CIT (incl. Tax Capital Groups), whose share of income in revenues (other than from capital gains) calculated for tax purposes will be less than 1%, or which will make a loss for a given tax year. 

The ‘minimum income tax’ rate is 10%. 

The tax base is to be the sum of the following:

  • 4% of “operational” revenue (other than from capital gains) plus
  • "excessive" debt financing costs paid to related entities (generally exceeding 30% of the so-called tax EBITDA), plus
  • the value of deferred income tax resulting from the disclosure of unamortized intangible assets in tax settlements to the extent that it results in an increase in gross profit or a decrease in gross loss,
  • costs of intangible services or royalties paid to related entities (with the scope and definition similar to the current art. 15e), exceeding 5% of the so-called tax EBITDA plus PLN 3 million.

When calculating the amount of the tax, taxpayers will be entitled to apply exemptions from art. 18 of the CIT Act (R&D relief and new reliefs announced in the Polish Deal, e.g. for prototyping and robotisation) as well as deduct from the tax base an income resulting from the activity in the Special Economic Zone or the Polish Investment Zone.

The provisions will not apply, i.a. to financial enterprises, start-ups and taxpayers who recorded over 30% decrease in revenues.

The amount of the minimum tax paid for a given tax year may be deducted from the due CIT calculated using the traditional method for consecutive 3 tax years immediately following the year for which the taxpayer has paid the minimum income tax.

Changes in Transfer Pricing

The most important change in the transfer pricing regulations in Poland is the introduction of the obligation to prepare the transfer pricing documentation for the so-called indirect tax haven transactions conducted in 2021 and later. They refer not only to transactions with related parties, but with unrelated entities as well. Those regulation apply if:

  • The transaction value exceeds PLN 0,5 million in a given tax year (only the cost generating transactions from the perspective of the taxpayer),
  • The beneficial owner of the counterparty is a tax haven entity (with the presumption that the counterparty’s beneficial owner is the tax haven entity if the counterparty conducts a cost generating transaction with the tax haven entity that exceeds PLN 0,5 million in value).

The additional changes were introduced as a part of the Polish Deal and apply to the transactions conducted in 2022 and later. Those changes include: 

  • Merger of the statement on the preparation of transfer pricing documentation and TPR form.
  • Changes to the statutory deadlines.
  • Additional exemptions from the obligation to prepare documentation.

Changes in WHT

As part of the Polish Deal, the pay and refund mechanism should as of 2022 apply if the following conditions are jointly met:

  • the payment will be classified as passive (i.e. dividends, interest, license fees), and
  • will be made with respect to related entities.

Payments qualified as passive and exceeding 2 million PLN per year which are made to related entities will be able to benefit from reduced rates or exemptions at source, provided that:

  • a ruling (binding opinion) on the application of reduced rates / exemptions will be obtained, or
  • a certification process will be carried out by the payer, which will be concluded with the submission of a designated statement.

Furthermore, the taxpayer is obliged to collect the tax if the total amount of receivables paid in one tax year to one taxpayer exceeds 2 million PLN and, additionally, when transactions without justified economic reasons will not be classified as passive payments (e.g. a payment will be artificially classified as a service).

Changes in CFC rules

As of 1st January 2022, due to an entrance into force of the provisions of the Polish Deal, the definition of a foreign entity has been changed. From January 2022, as a controlled foreign company may be considered entities whose co-owners owns at least 25% of shares in the capital or voting rights in the bodies controlling, constituting, managing or having the right to participate in profit and are Polish tax residents who, in the wording of the proposed regulations no longer have to be related parties. (until January 2022 only the participation of related entities was taken into account)

With regard to the modification of the current rules, the regulations change the current definition of a CFC by extending the scope of the so-called list of passive revenues, by taking into account revenues such us, among others, those for intangible services, rental, sublet, lease, sale of rights in a partnership, investment fund, or even in some cases the sale of goods. The test of the low effective income tax rate paid by the the controlled entity has also been changed, by increasing it from 50% of the standard CIT rate to 75% of the standard CIT rate (hence the effective income tax rate condition determining the CFC status was increased from the current 9.5% to 14.25%). 

Finally, it was proposed to add two additional CFC definitions introducing completely new conditions that must be examined in order to qualify as a CFC. These tests are related to the value of assets (i.e. shares in other companies, real estate, movable property, intangible assets, receivables) owned by a foreign entity. The introduction of new regulations requires Polish taxpayers to constantly monitor not only revenues but also foreign balance sheets subsidiaries.

New tax on the so-called ‘shifted income’

New tax on the so-called ‘shifted income’ (19%) - the “shifted income of the Polish entity” is understood as the cost that the Polish entity is paying to the directly and indirectly for related entities (in a form of intangible service payments, financing, royalties and risk transfer fees). Such costs are taxed @ 19% CIT if certain conditions are met i.a. 

  • if related payments taxed in recipient country with effective tax rate below 14.25% and
  • if such payments constitute at least 50% of the value of the revenues obtained by the recipient,
  • if such recipient makes further distributions (eg. as dividend payment) or recognises such payments as costs (back to back transactions).

However, the tax on shifted income is not applicable if the recipient conducts real economic activity in one of the EU/European Economic Area countries.

Tax amnesty

Tax amnesty allowing taxpayers to withdraw from optimization measures or disclosure of previously untaxed income.

Introduction of a Polish holding company

A holding company was introduced. The benefits from conducting business activity in this form cover: 

  • exemption from taxation of capital gain from the sale of shares in subsidiaries (not real estate companies) to an unrelated entity, and 
  • an exemption from withholding tax on 95% of the amount of dividends paid to this holding company by subsidiaries (meeting certain specific conditions).

The regulations introduce certain limitations on preferential taxation of the holding companies such as: these entities would need to conduct an actual (genuine) economic activity, would not be permitted to benefit from Special Economic Zone based exemption or decision on support for new investments as well as would not be permitted to benefit from a separate withholding tax exemption on dividends.

Modifications in the definition of a beneficial owner

Another modification is the change in the definition of a beneficial owner. As it stands, one of the conditions for being considered a beneficial owner assumes constituting an entity that ‘is not an intermediary, representative, trustee or other entity legally or factually obliged to transfer all or part of the receivables to another entity’. The amendment proposes deleting the words ‘legally or factually’.

Extended definition of tax residents

Extended definition of tax residents in Poland to include foreign entities for which activities are undertaken in Poland in organised way and on daily basis as a result of agreement, decision, court verdict or formal rules governing the way the taxpayer operates, or granted proxies, or TP-based relations.

Changes in value-added tax (VAT)

National e-Invoicing System 

In the beginning of 2022 the National e-Invoice System was launched, which enables the issuance and access to structured invoices. In the initial period, structured invoices will function as one of the acceptable forms of documenting transactions, alongside paper and electronic invoices.

The structured invoice is a record in xml format compliant with the logical structure of the FA(1) e-Invoice published in the Central Repository of Electronic Document Templates on the ePUAP platform.

As of January 1, 2022, the National e-Invoice System functions as an optional solution. However, after obtaining a derogation decision from the European Commission, it is planned to introduce structured invoices as a mandatory solution from 2023. 

SLIM VAT 2

As of 1 October 2021 (partially as of 1 January 2022), the provisions of the “SLIM VAT 2” package aimed at introducing simplifications to the VAT Act came into force:

  • removal of restrictions on issuing collective correction invoices,
  • taxpayers do not have to indicate the reason for correction of invoices,
  • cancellation of duplicate invoices,
  • extension of the possibility to issue an invoice from 30 to 60 days before delivery of goods, performance of a service or receipt of an advance payment,
  • simplification of VAT deduction on cars used for business activity,
  • VAT deduction on short-term trips related to the taxpayer's business activity,
  • more complete neutrality in taxation of import of services,
  • regulation of the method of performing in-minus adjustment in case of import of services and VAT,
  • easier possibility to select taxation options in real estate transactions,
  • extension of the time limit for claiming the bad debt relief from 2 to 3 years.

Taxation of financial services

From the beginning of 2022 the possibility to choose VAT taxation of selected financial services has been introduced. In particular, the change concerns: financial intermediation, management of investment funds, granting credits and loans, granting of securities, guarantees and other collaterals for financial transactions etc. However, this possibility has not been provided for insurance services. The decision on the choice of taxation will be binding for the taxpayer for at least 2 years.

VAT group

From July 2022, taxpayers will be able to form a VAT group. The main reason for this solution is that the entities included in it become one taxpayer for VAT purposes. A VAT group will be able to be formed by entities related financially, economically and organizationally. In this case it will not be necessary to have a status of a Tax Capital Group on the grounds of CIT. 

VAT e-commerce package

On 1 July 2021, the so-called e-commerce package introducing changes regarding e-commerce and import of small consignments into the European Union became effective in Poland. The e-commerce package introduced one limit for intra-EU mail order sales - EUR 10 thousand net concerning sales (B2C) of services and goods. Sales up to EUR 10 thousand will be subject to declaration in the seller's member state.

Another change is the elimination of the EU-wide VAT exemption on imports of so-called small shipments of up to EUR 22.

In addition, the so-called Mini One Stop Shop (MOSS) has been expanded to become a One Stop Shop (OSS) covering a range of other B2C transactions. The OSS enables:

  • electronic registration for VAT purposes in one Member State,
  • VAT settlements in a single electronic quarterly tax return,
  • cooperation with their own country tax administration even if the sale is of cross-border nature.

Retail tax

On 1 September 2016, the Retail Tax Act of 6 July 2016 entered into force, but was quickly suspended for 2016 and 2017 due to European Commission (EC) investigation into the Polish tax on the retail sector. After several postponements, this law came into force on 1 January 2021.

Based on the Retail Tax Act, retailers are to be taxed on the revenues achieved on retail sales, which should be understood as sales of goods to consumers for remuneration, in case an agreement is concluded on the business premises or away from business premises of the given taxpayer. Thus, e-commerce sales should not be subject to this tax. In this context, the services associated with retail sales should also be subject to taxation, unless they are recorded separately from the sale of goods.

Capacity fee

On 1 January 2021, the capacity fee charged for electricity entered into force. The law introducing the fee was passed by the Parliament in 2017.

It will be a new item on the bills for electricity consumed by each consumer. 

The capacity fee will be collected, inter alia, from end users connected directly to the transmission network and electricity distribution system operators. 

The President of the Energy Regulatory Office indicated that the capacity fee will be charged for each consumed MWh in the period from Monday to Friday (excluding public holidays) from 7:00 to 22:00. Its amount will depend on the degree of consumption and will amount to PLN 76.2 per each consumed MWh (PLN 0.0762 / kWh).

Sugar tax and fee on alcoholic beverages

The fee on foodstuffs, the so-called 'sugar tax', was imposed on beverages with added sugars, sweeteners, and caffeine or taurine. The amount of the sugar tax is: 

  • PLN 0.50 for the content of sugars in an amount equal to or less than 5 g in 100 ml of drink, or for the content of at least one sweetener in any amount.
  • PLN 0.05 for each gram of sugar above 5 g in 100 ml of drink. 

Drinks containing the addition of caffeine or taurine will be charged a fee of PLN 0.10 per litre of drink. This fee will be paid, among others, by entities supplying retail stores.

The fee for the permit for domestic wholesale trade in alcoholic beverages with alcohol content above and below 18% will be imposed on alcoholic beverages in unit packages with a nominal quantity of the drink not exceeding 300 ml.

New tax reliefs

Changes in the R&D relief

From 2022, there is an increase of the existing R&D deductions in income taxes from 100% to 200% of qualified costs as a part of R&D tax relief incurred on employees that covers the costs of staff hired by taxpayers for R&D purposes.

Simultaneous IP BOX and R&D relief

As part of the Polish Deal, a taxpayer commercializing the results of research and development and obtaining qualified income from them within the meaning of the IP Box provisions has the possibility of deducting R&D relief from the IP Box income of eligible costs incurred to develop the right covered by IP Box.

Innovative employees tax relief

The relief is intended to support the innovativeness of Polish entities and will promote the employment of highly qualified workers. The mechanism is an extension of the existing R&D relief. According to the Polish Deal Act, taxpayers benefitting from R&D tax relief that had not been settled in the previous year, will be able to deduct from advances for personal income tax charged on the income (revenue) of individuals, due to:

  • service relationship, employment relationship, contract work, cooperative employment relationship,
  • services provided under a contract of mandate or contract for specific work,
  • copyrights.

The condition for the deduction will be that a given employee devotes at least 50% of the total working time directly to R&D activities in a given month. The deduction will be valid from the month in which the taxpayer submitted a tax return for a given year until the end of that tax year.

Relief for Robotization

The relief was introduced for a period of 5 years and covers expenses from the beginning of the 2022 fiscal year until the end of the 2026 fiscal year. It will be available to both PIT and CIT taxpayers investing in robotization, regardless of the size of their operations. The relief will be a response to the needs of those companies that plan to modernize production plants, increase processing capacity or reduce manual work as part of automation. Entrepreneurs will additionally be able to deduct 50% of the costs incurred for investments in robotization. 

The deduction is to apply in particular to: 

  • purchase or financial leasing of new robots and cobots, 
  • purchase of software necessary for the proper start-up of new fixed assets in the field of robotization, 
  • purchase of accessories (e.g. tracks, turntables, controllers, motion sensors, end effects),
  • purchase of occupational health and safety (OHS) devices, 
  • training costs for employees who will operate the new equipment.

The value of the deduction may not exceed the amount of income in a given tax year.

Relief for Prototype

The Prototype relief will allow a deduction from the tax base of 30% of the sum of the costs of the trial production of a new product and the launch of a new product, but the amount of the deduction cannot exceed 10% of the income earned from sources other than capital gains in a tax year. It is an extension of the already existing R&D relief and its scope covers the stage after completion of R&D works but before mass production of the developed product.

The deduction is to be limited to selected costs, including:

  • the purchase price or production cost of new fixed assets necessary to start trial production of a new product,
  • purchase costs of materials and raw materials purchased solely for the purpose of trial production of a new product,
  • costs of improvement incurred to adapt the fixed asset to launch trial production of a new product,
  • research, expertise and certification costs,
  • product life cycle studies,
  • environmental technology verification system.

 

The costs incurred will be shown in the annual tax declaration with the possibility of their deduction in the next six years following immediately after the year in which they were incurred. 

Relief for Expansion

The main purpose of the tax relief is the possibility of an additional deduction of the value of expenses related to the increase in revenues from the sale of products. The product may be an item already produced by the taxpayer, as well as items not yet offered by the taxpayer and not yet offered in a given country.

The relief may be settled on an ongoing basis, and the increase in revenues should be shown for 2 years, which requires monitoring of revenues obtained from products to which eligible costs were allocated.

Expenses for the expansion will be eligible for a two-fold deduction up to the amount of PLN 1 million in a given tax year.

 

The costs associated with increasing revenues from the sale of products are:

  • participation in fairs (e.g. organization, accommodation),
  • promotional activities,
  • adaptation of packaging to the contractor's requirements,
  • preparation of documentation for the sale of products (e.g. certification of goods and registration of trademarks),
  • cost of tender documentation.

Relief for CSR

The CSR relief will be intended for all entrepreneurs. They will be able to deduct an additional 50% from the tax base. Deductible costs incurred for activities such as: sports, culture, higher education and science. The CSR relief will be deducted up to the amount of income obtained in the tax year. The new preference, similar to the R&D relief in force for several years, will be deductible in the tax return for the tax year in which the costs were incurred.

Eligible costs will include: 

  • purchase of sports equipment, covering the costs of organizing or participating in sports competitions, covering the costs of using sports facilities for the purposes of sports training, financing sport’s scholarships,
  • costs also incurred for sport’s events  not being  mass sport’s events. 
  • costs incurred for the benefit of cultural institutions entered in the register of cultural institutions, as well as for financing cultural activities carried out by art academies and public art schools. 
  • costs incurred for student scholarships for academic performance or sports and for research scholarships for doctoral students, costs of fees related to the education of an employed employee in studies, post-graduate studies and other forms of education, costs of remuneration of students during internships work placements.

The tax relief will be deducted from the taxpayer's annual tax return and the costs incurred for the tax credit will also be shown. In addition, the taxpayer will be entitled to additional income tax preferences by deducting half of the costs incurred from the tax base.

Relief for IPO

The Relief for IPO allows for the deduction of costs incurred in the scope of the initial public offering. The Relief for IPO is aimed at supporting the process of raising capital as part of the first issue on the stock exchange. The Relief for IPO will be intended for Polish tax residents intending to issue shares in the initial public offering, making the company public by introducing its shares to trading on the stock exchange.

The catalog of eligible expenses is closed and is divided into two categories.

Expenses eligible for 150% of tax deductible costs:

  • preparation of the prospectus,
  • notary, court, fiscal and stock exchange fees,
  • preparation and publication of advertisements required by law.

Expenses eligible for 50% of tax deductible costs (limit of PLN 50,000):

  • advisory, legal and financial services costs.

The expenses must be incurred directly for making the IPO, i.e. related directly and exclusively to the IPO, incurred in the IPO year or in the preceding year, but not later than on the IPO date when the taxpayer introduced his shares to trading for the first time.

Relief for Consolidation

The taxpayer who bears the eligible expenses for the acquisition of shares in a capital company has the right to reduce its tax base by these expenses in the year in which they are actually incurred, while meeting the following conditions:

  • the company whose shares are acquired has its registered office or management board in the territory of the Republic of Poland or in a country with which the Republic of Poland has concluded a double taxation agreement, 
  • the main activity of the company whose shares are acquired is the same as the subject of the taxpayer's activity, or the company's operations may be considered to support the taxpayer's activities, excluding financial activities, 
  • the main activity of the company whose shares are acquired is conducted at least 24 months prior to the acquisition of the shares,
  • within 24 months prior to the acquisition of the shares, the company and the taxpayer do not they were related parties 
  • the taxpayer is obliged to acquire shares in one transaction representing an absolute majority of voting rights (51%).

The maximum amount of the deduction in a tax year: PLN 250k.

Eligible expenses subject to deduction: 

  • legal services for the purchase of shares or stocks, 
  • taxes charged directly on the transaction, 
  • notary, court and fiscal fees,

The deduction of expenses related to the acquisition of another company will be due to the taxpayer in the tax year in which he will acquire shares in that company and will apply to the amount of expenses incurred by the taxpayer in that tax year.