The amendment of the CIT Act, signed in recent days by the President of the Republic of Poland, contains an interesting solution aimed at encouraging companies to leave capital for development.
The leaving of capital in the company is to be facilitated by a new regulation on the possibility of taking into account in the cost of obtaining a hypothetical interest on payments made to the company by shareholders or interest on the so-called retained profits.
As we read in the explanatory memorandum to the amendment of the Act, the amendment aims at "promoting activities aimed at creating self-financing capital in companies resulting from retained earnings and subsidies paid by shareholders".
The existing rules did not provide for such a possibility, which led to a more favourable financing of the activities by loan, given the possibility to charge interest income on such loans and other charges. Let us look at the details of the change.
The leaving of capital in the company is to be encouraged by the new rules on the possibility of taking into account in the cost of obtaining hypothetical interest on payments to the company by shareholders or interest on so-called retained profits
According to the new Article 15cb The CIT Act shall be considered as the cost of obtaining the income of the taxpayer being the company to the amount corresponding to the product of the NBP reference rate in force on the last working day of the year preceding the year of tax plus 1% and the amount of aid or profit transferred to the company’s reserve or reserve capital.
This cost will be due in the year of payment of the aid or increase of the reserve or reserve capital and in subsequent years two years (section 2). It should be noted that the total amount of such determined revenue costs deducted in a given year must not exceed 250,000 PLN (section 3).
The legislator also made other reservations in the new legislation. Order from Article 15cb(1) will not apply to payments and profits intended to cover the balance sheet loss (section 4).
The company will be able to reimburse or distribute the profit not earlier than after the end of 3 years from the end of the tax year in which the surcharge was paid or a resolution was adopted on the retention of profits in the company (section 5). Otherwise, i.e.
return before that date, the income for the company will be the value corresponding to the deducted cost of obtaining revenue (section 7).
The provisions introduced are modelled on similar solutions already applied in Belgium, Portugal, Cyprus and Italy.
These regulations are to enter into force only from 2020, However, they will also apply to retained earnings in the year 2019
Author:
Mikołaj Stanisławski
From 2017 Associated with Russell Bedford Poland. In 2007 graduated from the Faculty of Law and Administration of the University of Warsaw. In years 2008-2011 he made an attorney's application. From 2011 entered on the list of lawyers at the District Bar Council in Warsaw. In 2016 He graduated from the Postgraduate Tax Studies and Tax Law of the University of Warsaw. Specializes in tax and tax matters.