Poland

The current political discussion in Poland focuses on the war started by Russia in the neighboring country Ukraine, which has triggered the energy crisis, economical and social challenges, as well as accelerated the rise of inflation and interest rates. In order to tackle increasing inflation, various forms of reliefs have been introduced under so-called ‘anti-inflationary shield’ and ‘energy shield’, having impact, inter alia, on indirect taxes on specified goods consumed by individuals in 2022-2024.

During the period of 2022-2023 the major changes in the tax law - including corporate income tax (CIT) in the areas of investments, tax reliefs, transfer pricing,  international taxes, and mergers and acquisitions, as well as personal income tax (PIT), value-added tax (VAT), and technology in taxes - were introduced by subsequent amendments under the so-called ’Polish Deal‘ legislation packages.

A first package came into force on 1 January 2022 and was soon amended with a retroactive effect in the area of PIT (assuming, i.a., reduction of PIT tax from 17% to 12%, elimination of the tax relief for the middle class and changes in the health insurance premium). A subsequent amendment was published by the end of 2022, introducing changes to tax regulations, mainly concerning CIT in the areas introduced by the Polish Deal (so-called ‘Polish Deal 3.0’) with effect from 2023.

Due to the parliamentary elections and change of the governing party taking place at the end of 2023, the beginning of 2024 has not brought many changes in tax law.

Changes in corporate income tax (CIT)

Changes to corporate income tax introduced in 2023

During 2023, several significant amendments were introduced that impact CIT:

• With the introduction of the legal form of a family foundation into the Polish legal system with effect from 22 May 2023, tax laws - in particular the CIT Act - have been amended with regard to taxation of economic events related to the operation of family foundations. According to these rules, family foundations are exempt from CIT on the ongoing, permitted (statutory) activities. CIT liability arises at 15% CIT rate only at the time of transfer of the benefit to the beneficiary (i.e. benefits provided in accordance with the principles of operation of the foundation, the so-called "post-liquidation property" of such a foundation, as well as benefits in the form of ‘hidden profits’). This solution has been shaped similar to the Estonian CIT mechanism.
• The amendment to the Commercial Companies Code entered into force on 15 September 2023 and introduced changes in restructuring activities, which also have effects in terms of CIT and tax ordinance:
• a new method of division as an alternative to contribution-in-kind of a going concern while maintaining tax succession - i.e. division by separation. Such a division is tax neutral provided that the assets taken over and the assets remaining in the company constitute going concerns;
• simplified procedure for a zero-emission merger, i.e. without increasing the share capital (if the same partner/partners hold, directly or indirectly, all shares in the merging companies);
• regulation on cross-border reorganizations (division, merger, transformation), including clarification of the provisions on tax succession and obligation to obtain the opinion of the Head of the National Tax Administration - on the existence of a justified suspicion of tax avoidance or abuse of law, and confirmation that the company's financial obligations towards the authorities are satisfied or secured. 

Including Russia on the UE blacklist of tax havens

On 14 February 2023, the Russian Federation was included in the EU list of non-cooperative jurisdictions for tax purposes (the so-called blacklist of tax havens) adopted by the Council of the European Union. This decision may trigger negative CIT consequences for Polish residents with capital connections in Russia, i.e.:

• holding shares in entities with their registered office, management board or place of registration or location there (recognition of the entity as a CFC by default / inability to apply the exemption for a Polish holding company), or
• having Russian entities in their capital structure (loss of the status of a Polish holding company), or
• regulating payments to related Russian entities (recognition of expenses as diverted profits).

Polish Deal packages 

The reform of Polish corporate income tax rules under the Polish Deal legislation initiative in 2022 and 2023 (so-called ‘Polish Deal 1.0’, ‘Polish Deal 2.0’ and ‘Polish Deal 3.0’) concerned the following areas:

• Introduction of a ‘minimum income tax’ for all entities subject to CIT (including tax capital groups) whose share of income in revenues (other than from capital gains) calculated for tax purposes is less than a profitability ratio (currently established at 2%)  or which made a loss for a given tax year. The minimum income tax was initially introduced as of 2022, and subsequently changed by multiple modifications as well as suspension until 31 December 2023. Thus, effectively, the minimum tax comes into force in the amended structure starting from 2024.
• Extension of controlled foreign company (CFC) regulations (as of 2022) by: 

• the change of a CFC definition (extending the  co-owners relations who no longer have to be related parties, and extending the scope of the so-called 'list of passive revenues');
• increase of the test of low effective income tax rate determining the CFC status from 50% of the standard CIT rate to 75% of the standard CIT rate (hence the effective income tax rate condition was increased from 9.5% to 14.25%);
• addition of two new  CFC status tests -  related to the value of assets (i.e. shares in other companies, real estate, movable property, intangible assets, receivables) owned by a foreign entity.

What is more, the amendment adopted as of 2023 introduced clarifying provisions of the definition of a subsidiary entity, rules for CFC income determination, and the premise of a high profitability of the foreign entity in relation to its assets.

• Introduction of the provisions on so-called ’diverted profits‘, aimed at eliminating the possibility of obtaining tax benefits through the transfer of profits to related entities resident in tax jurisdictions with a marginal effective tax rate lower than 14.25%. The new regulations on diverted profits replaced the provisions on the limitation of costs incurred towards related entities (article 15e of the CIT Act repealed at the end of 2021). These rules came into force as of 2022, and were further amended for clarification and imposement of due care obligations on taxpayers (effective from 2023).
• Starting from 2022, application of the pay-and-refund mechanism on withholding tax should take place with regard to passive payments (i.e. dividends, interest, license fees) to foreign related entities exceeding PLN 2 million per year. In such cases, a tax remitter is required to automatically collect the tax at the statutory domestic rate (19% or 20%), regardless of the possible application of tax exemptions or reduced rates. Subsequently, the taxpayer/remitter has the right to claim for a WHT refund. However, such passive payments may benefit from reduced rates or exemptions at source, provided that:
• a ruling (binding opinion) on the application of reduced rates / exemptions is obtained (valid for three years), or
• a certification process is carried out by the payer, which will be concluded with the submission of a remitter's statement.

The further amendment to the rules on submitting  the remitter's declaration made it more flexible by extending the time scope. The submission of a declaration allows this mechanism not to apply until the end of the remitter's tax year, including the declarations submitted in 2022. Changes also included the exemption from the application of certain obligations of payers with respect to withholding taxation of interest and discount on certain securities.

• Provision of the tax exemption on dividends and capital gains from the sale of shares in subsidiaries to unrelated entities under a preferential ‘Polish holding company’ tax regime (initially introduced as of 2022, and further clarified and improved in 2023 in a way that allowed a larger group of companies to benefit from the holding tax benefits)

• Amendments to the rules on the lump-sum tax on companies’ income, commonly referred to as ‘Estonian CIT’, aimed at propagation and clarification of this taxation model. The Estonian CIT regime is an optional, autonomous system of taxation of companies whose all shareholders or partners are natural persons and have no shares in other entities, available in Poland as of 2021. As a result of amendments introduced in 2022, the scope of entities that can opt for this form of taxation has been widened. Further amendments introduced in 2023 provided, i.a., a change to the method of income determination in the case of the use of assets (e.g. passenger cars) for business and other non-business purposes and extension of the deadline for paying the tax to the end of the third month of the tax year following the year in which the profit was distributed (i.e. a resolution was adopted).
• Amendments to the rules on documenting transaction with tax havens (transfer pricing) aimed to increase the materiality thresholds for direct transactions with tax havens, which, if exceeded, raise documenting obligations, and fully revocate the documenting obligations in indirect transactions with tax havens (effective from 2021).
• New and modified tax reliefs introduced as of 2022:
• research and development (R&D) relief - an increase of the existing R&D deductions in income taxes from 100% to 200% of qualified costs of staff, 
• simultaneous Intellectual Property (IP) Box and R&D relief,
• innovative employees relief - a new extension of the existing R&D relief applicable in case R&D relief had not been settled in the previous year; taxpayers are able to deduct it from advances for PIT charged on the income (revenue) of individuals, provided a given employee devotes at least 50% of the total working time directly to R&D activities in a given month,
• robotisation relief - an additional deduction of 50% of the costs incurred for investments in robotisation; introduced for a period of five fiscal years and covers expenses from the beginning of the 2022 until the end of the 2026,
• prototype relief - a new extension of the existing R&D relief applicable at the stage after completion of R&D works but before mass production of the developed new product, allowing a deduction of 30% of the sum of the trial production and the launch costs (up to 10% of the income derived from operational activities),
• expansion relief - an additional deduction from the tax base of expenses related to the increase in revenues from the sale of products (incurred to expand sales markets); available within the 2 tax years, counting from the tax year in which the costs of increasing revenues were incurred (up to PLN 1 million per annum),
• CSR relief - an additional deduction from the tax base of 50% costs incurred for activities such as sports, culture, higher education, and science (up to the amount of income obtained in the tax year),
• IPO relief - deduction of costs incurred directly for making the IPO, aimed at supporting the process of raising capital as part of the first issue on the stock exchange; expenses are divided into eligible for 150% deduction (prospectus, notary, court, fiscal, and stock exchange fees, advertisements required by law) and eligible for 50%, up to a limit of PLN 50,000, (advisory, legal, and financial services costs),
• consolidation relief - deduction from the tax base of expenses related to the acquisition of another company conducting the activity the same as or supportive to the taxpayer’s activity, up to PLN 250,000 in a tax year.
• The Polish Deal package also included a 'hidden dividend' regulation, which was to come into force on 1 January 2023. However, these rules were eventually revoked, considering the raised doubts in terms of the  unclear interplay to transfer pricing provisions and redundancy of anti-abuse rules that may apply to similar categories of payments.

Changes in value-added tax (VAT)

The main areas of changes in the Polish VAT system for 2024 will be related to digitalization of reporting obligations (i.e. preparation of mandatory e-invoicing system, introduction of Central Electronic System of Payment information.

In recent years, the majority of amendments - apart from digitalisation -  has focused on simplifications for taxpayers (in particular, implementation of three Slim VAT legislative packages and introduction of VAT groups). Also certain ‘anti-inflationary shield’ measures were introduced as temporary solutions (still maintained until early 2024).

National e-Invoicing System 

As of 2022, the National e-Invoice System was launched, which enables issuance of and access to structured invoices. In the initial period, structured invoices have been introduced as one of the acceptable forms of documenting transactions, alongside paper and electronic invoices. Structured invoices as a mandatory solution were planned to come into force from 1 July 2024; however, a recent announcement of the Ministry of Finance (issued in January 2024) provides for further postponement of mandatory structured invoices no earlier than until 2025 (the new statutory date has not yet been determined).

Taxpayers who are exempt from taxation (small businesses) or who perform only tax-exempt activities will be also required to use the National e-Invoice System, but the statutory date for this group (1 January 2025) will be also most probably postponed. 

Mandatory e-invoicing will apply in principle to all transactions that have been so far documented with invoices (including domestic supplies of goods and services made between entrepreneurs (B2B) and  public authorities (B2G)), with the exception of invoices issued to consumers - natural persons (B2C turnover) and specific transactions, such as highway tickets or transportation of passengers.

At the same time, it is planned to completely exclude the obligation to issue structured invoices in relation to the provision of specific services exempt from VAT (i.a. insurance and financial services). However, the provisions that regulate this issue are still in the process of consultation.

On the other hand, the National e-Invoice System will remain optional for other foreign taxpayers who do not have a seat or a fixed establishment in the territory of Poland, as well as lump-sum farmers.

The structured invoices and National e-Invoice System are discussed in more detail in the section Other taxes: Value-added tax (VAT).

SLIM VAT packages

As of 1 July 2023 (partially as of 15 September 2023), the following provisions aimed at introducing further simplifications to the Polish VAT Act (so-called ‘SLIM VAT 3’ package) entered into force:

• Simplification and unification of the rules of currency conversion for corrective invoices (i.e. both in plus and in minus corrections).
• Clarification of the regulations on reducing VAT sanctions by indicating the specific circumstances of the case that should be taken into account by the authorities when imposing an additional obligation.
• Abolition of the obligation to agree the proportion/forecast of the pre-ratio with the head of the tax office in the form of a protocol in case of taxpayers conducting the so-called ‘mixed sale’ and setting the initial proportion.

• Liberalisation of the conditions for faster VAT refund for the so-called ‘non-cash taxpayers’.
• Faster refund of the amount spent on the purchase of the cash register.
• Clarification of the rules of the TAX FREE system in the event that the traveler's tax refund in cash took place after the deadline for submitting the tax declaration.

The previous package of amendments aimed at introducing simplifications to the VAT Act (so-called ‘SLIM VAT 2’ package) was adopted as of 1 October 2021 (partially as of 1 January 2022) and covered, inter alia, removal of restrictions on issuing collective correction invoices and cancellation of duplicate invoices, simplification of VAT deduction on cars used for business activity and amendments to reporting of import of services.

Central Electronic System of Payment information

As of 1 January 2024,  the payment service providers are obliged to keep electronic records of payment data for cross-border payments and to exchange these records with a newly established central EU-database, i.e. Central Electronic System of Payment information (the so-called CESOP). The purpose of the new reporting obligation is to combat VAT fraud.

Under the new reporting requirements, domestic banks, foreign bank branches, credit institutions, payment institutions, and credit unions must maintain, store, and report on cross-border payments to the Head of National Revenue Administration, when the payment service provider makes more than 25 such payments to the same payee per quarter.

Payment service providers must keep electronic records of cross-border payments for a period of three calendar years from the tax year the payment was made.

The first CESOP report should be sent to the competent authorities by 30 April 2024. The Ministry of Finance will transfer the collected data to the central register by 10 May 2024.

Taxation of financial services

From 2022, the possibility to choose VAT taxation (instead of tax exemption) of selected financial services has been introduced.

VAT group

From 1 January 2023, taxpayers are able to form a VAT group. The main reason for this solution is that the group of entities registers as one taxpayer for VAT purposes. Thus, the supply of goods or services performed between entities being members of the same VAT group shall not be subject to VAT. 

The option to form a VAT group, newly introduced to the Polish tax system (available to taxpayers as of 2023), is discussed in the Group taxation section.

Excise duty

At the beginning of 2024 it seems that this year will not bring many changes to the Polish excise duty system.

The majority of governmental works should focus on digitalization of excise duty-related obligations, such as keeping proper records. 

In 2023 MoF started development of so-called Central Register of Excise Taxable Goods (Centralna Ewidencja Wyrobów Akcyzowych, or CEWA), but to the governmental change in Oct. 2023 it its highly unlikely that CEWA will be introduced in 2024.