Exit tax in Polish

The Ministry of Finance planned to introduce a new tax – on unrealised capital gains. Denmark is to deal with legal persons, natural persons and generally prevent the transfer of business, assets, assets abroad. In practice, it will therefore discourage entrepreneurs from doing this and changing their tax residence. Regulation should apply from 1 January 2019.

Introduction

The provisions on exit tax were included in the draft large tax changes from 24 August 2018 1 The Ministry of Finance points out in the explanatory memorandum of the amendment that the purpose of this tax is to implement Article 5 Directive 2016/1164 to 12 July 2016, laying down rules to prevent tax avoidance practices which have a direct impact on the functioning of the internal market 2 (hereinafter: the ATA D Directive.

Under the ATA D Directive, the objective of the Unrealised Capital Profit Tax is to ensure that, when the taxpayer transfers assets or tax residence outside the tax jurisdiction of the country concerned, that country could tax the economic value of any such gains achieved in its territory, despite the fact that these profits have not yet been realised at the time of the change of jurisdiction.

According to the Directive, the right to this tax should be determined at national level[3].

Criteria and rates of taxation of unrealised capital gains

The drafter points out in the justification for the changes that the scope of the tax on removals varies from one EU Member State to another, some of which apply only to legal persons or individuals and, in part, to both categories of taxpayers. The Act provides for the creation of an income tax on individuals 4 (Further, as well as in the Corporate Income Tax Act 5 ( Next: the Corporate Income Tax Act) new divisions concerning this tax[6].

For legal persons, the tax on income from unrealised gains is to be equal to 19% the tax base and the tax will be subject to: 1) the transfer of an asset outside the territory of the Republic of Poland, as a result of which the Republic of Poland loses in whole or in part the right to tax the proceeds from the disposal of that asset, while the transferred asset remains the property of the same entity; 2) change of tax residence by a taxable person subject to the tax obligation in Poland on all of his income, resulting in Poland losing in whole or in part the right to tax revenue from the disposal of an asset owned by that taxpayer in connection with the transfer of its registered office or management to another State[7].

The amending law also clarifies that an undertaking or an organised part thereof is an asset. The transfer of an asset outside the territory of the Republic of Poland includes, inter alia, situations in which the taxpayer transfers to his foreign establishment an asset so far related to activities carried out in Poland or transfers to another country all or part of the activity carried out so far through a foreign establishment located in the territory of the Republic of Poland[8].

The income from unrealised gains represents an excess of the market value of the transferred asset, including the resulting change in tax residence, set at the date of its transfer above its tax value 9 – i.e. the value not previously included in the cost of obtaining revenue in any form which would have been accepted by the taxpayer for such cost if the component had been disposed of by him for payment[10].

For PIT taxpayers to be two tax rates: 1) 19% tax base — when the tax value of the asset is determined, 2) 3% tax base – if this value is not established. The taxation is to be subject to: 1) the transfer of an asset outside the territory of the Republic of Poland resulting in the loss of all or part of the right to tax the proceeds from the disposal of that asset; 2) change of tax residence by a taxable person subject to the tax obligation in the Republic of Poland on all of his income, resulting in Poland losing in whole or in part the right to tax revenue from the disposal of an asset owned by that taxpayer in connection with the transfer of his residence to another State[11].

In the case of a non-economic asset, taxation will be subject to: all rights and obligations in a company that is not a legal person, shares in a company, shares and other securities, financial derivatives and participation in capital funds, together with the condition that the taxpayer is resident in the territory of the Republic of Poland by at least five years before the date of the change of tax residence[12].

Individuals will pay exit tax if the market value of their assets, the asset, exceeds 2,000,000 PLN. CIT and PIT taxpayers will be able to apply to the head of the tax office for payment of all or part of the tax for a period of no more than 5 years from the end of the tax year in which the obligation to pay it arose.

Summary

New regulations are to apply in Poland from 1 January Next year, although EU Member States have time to implement the ATA Directive D to the end 2019 Ministry of Finance is very in a hurry to implement the exit tax 13 , planning to publish the bill by the end of November 2019 The regulation also creates controversy in view of the imposition of tax on unrealised profits of individuals, including those who do not engage in economic activities. The Ministry of Finance does not exclude changes concerning, inter alia, the threshold for the amount of assets or the forms of payment of tax on unrealised profits.

Source: