Changes in taxes 2019

Amendments to the existing tax legislation make many changes to 2019. First of all, we must consider numerous modifications to the CIT/PIT regulations and modernized transfer pricing regulations.

The rules on the succession of companies have also been revised, which has so far been significantly hampered, and often impossible. The amendments also tighten the anti-tax avoidance clauses.

Car at the company from 2019

Any entrepreneur who owns or plans to buy a passenger car in his business should prepare for new, less favorable regulations.

Changes in the purchase and use of a passenger car are:

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introduction of an operating leasing limit,
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limiting the possibility of accounting for operating expenses in the cost of obtaining income for passenger cars used both for business and private purposes.
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the elimination of kilometres for income tax purposes when clearing private cars used in the business,
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limit for private cars, where only 20% expenditure relating to the vehicle may be classified as tax costs.

Following the amendment of the tax rules, operating leases became subject to a limit equivalent to 150,000 in Polish currency for combustion-engine vehicles and two hundred and twenty-five thousand Polish zlotys for electric vehicles, as defined in Article 2(12) of the Act of 11 January 2018 on electromobility and alternative fuels (Journal of Laws, items 317 and 1356). This change still required the approval of the European Commission. It is worth noting that no such limit applied until the end of 2018.

The depreciation limit for purchased vehicles has also changed. Raised to the amount 150,000 PLN for combustion vehicles and 225,000 PLN for electric vehicles. Subject to the fact that, for electric vehicles, as defined in the Electricity and Alternative Fuels Act, the limit will apply once the European Commission has given its agreement on the compatibility of public aid with the common market and will apply from the day following the date of the publication of the positive decision of the European Commission.

It is also worth paying attention to changes in taxation of costs incurred in purchasing fuel and operating company cars. The possibility of deducting costs in the full amount of the tax will only be available for a vehicle used solely for business purposes, where additional supporting records will be required.

On the other hand, the clearing of passenger cars used for mixed purposes i.e. ed 25%, and entrepreneurs can only benefit from 75% the reduction of the included cost of obtaining revenue from expenses related to the passenger car.

Changes to the tax rules on passenger cars, which are not a permanent measure in the company, also refer to the resignation of "kilometres". She lifted that obligation Act dated 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other laws. (Journal of Laws of 2018, item 2159).

An economic operator will not have to carry out ‘kilometers’ for the purpose of calculating income tax. The cost limit for the use of a private car in the company, which is currently at 20% operating expenditure incurred.

For whom CIT 9% ?

Since January 2019 In the Act dated 15 February 1992 on corporate income tax (Journal of Laws of 1992, item 86) rate 15% income tax has been reduced to 9% and will apply to revenue generated from 1 January 2019. The new rate can only be applied to revenue from sources other than capital gains, but not every taxpayer can benefit from it.

It will be necessary for the taxable person to benefit from the lowest CIT rate to verify precisely whether it is possible to apply a reduced CIT rate — 9%.

The provisions refer to two groups of taxpayers, i.e. small taxpayers already engaged in economic activities (gross cap stock to verify the right to apply the rate) and taxable persons who are just starting their activities. In this year both one as well as others must monitor net revenue, because after exceeding the threshold they lose the right to a rate 9%.

The rate is provided for a CIT with the status of a small taxable person who does not exceed, in addition, 1,200,000 EUR net revenue in the previous year and in the current year (the value will be converted by the average rate of NBP into first the working day of the tax year rounded to 1,000 PLN.).

It will be easier for new entrants who wish to apply a reduced CIT rate to not exceed In the first year of revenue activity 1,200,000 EUR net. Tax groups will be excluded from applying the reduced CIT rate. CIT rate 9% may not be used in the case of split companies as well as in the case of taxable persons contributing to the company in excess of 10,000 EUR.

Tax on rented buildings

Changes in taxes also bring us revised regulations on rented buildings. In 2019 owners of buildings worth a total of more than 10,000,000 PLN, who derive income from the lease of these buildings, will pay a tax on commercial property, or rented. Before the amendment, the commercial property tax only charged owners of buildings classified as:

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a department store,
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shopping centre,
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independent store,
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a commercial and service building, or
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office.

Under the new rules, not the nature of the property and its value will determine whether the property will be subject to commercial property tax.

This means that the shape of the commercial property tax has changed, and any tax-paying building, including one that is co-ownership, will be subject to a monthly tax of 0.035% the initial value of the building.

Any building which has been wholly or partly put into service under a lease, lease or other similar contract will be subject to taxation. Thus, much more entities will be required to pay commercial property tax.

Almost all owners of buildings with a value exceeding total 10,000,000 PLN, who derive income from rental or similar contracts will be subject to commercial property tax.

It follows that warehouse owners who rent only part of the hall area as well as apartment owners who provide rental services and do not provide hotel services will pay tribute.

Commercial property tax will not be subject to buildings for specific public purposes, nor will buildings whose rented area does not exceed 5% the total area of the building.

Innovation Box, i.e. preferential taxation of intellectual property income

In 2019, to make R & D in Poland more attractive by Polish and foreign companies, was introduced 5% the tax on income generated by intellectual property rights which the taxpayer owns, co-owners, users or holds the right to use such property under a licensing agreement, and those which are protected under applicable national or international law, and those protected by patenting, having the right to register an industrial design or the right to protect a utility design. This leads to a more favourable solution for taxpayers who obtain income from commercialisation of intellectual property rights created or developed by them.

In 2019, to make R & D in Poland more attractive by Polish and foreign companies, was introduced 5% tax on income generated by intellectual property rights

Implemented under the names: Patent Box, Intellectual Property Box, Knowledge Developement Box, and operating in many countries such as Slovakia, France, Hungary, the Netherlands, United Kingdom, the solution proposed in Poland under the name IP Box, i.e.Innovation Box, which is characterised by a reduction in the tax rate on intellectual property rights income, is intended to increase interest in R & D work conducted in Poland.

This innovation makes the Polish tax system more competitive and attractive for companies developing high technologies. The proposed relief is intended to prevent entrepreneurs from investing their intellectual property rights in countries that offer lower taxation to taxpayers who obtain income from intellectual property rights.

Revenue generated by royalties or other claims related to the use of intellectual property rights, such as income from the sale of intellectual property rights, income from assets included in the sale price or service, will be income eligible for the IP Box credit. The Innovation Box will also benefit the taxpayer if he purchases intellectual property rights, provided that the costs associated with the development or improvement of the acquired law are incurred.

Denmark

In 2019 a solidarity tribute has been introduced. The Solidarity Fund for the Support of Persons with Disabilities assumes assistance, support and fight against social exclusion of people with disabilities.

The fund will be powered from:

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a solidarity contribution of 4% on income of natural persons who have earned above 1,000,000 PLN in the tax year and
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compulsory contribution to the Solidarity Fund for the Support of Persons with Disabilities, which will be financed from the contribution, from the Labour Fund of 0.15%.

It is estimated that those who pay the solidarity tribute, i.e. those who earn above 1,000,000 PLN annual tax year will be around 21,000, and the revenue from the solidarity tax and the compulsory contribution will be around 2,000,000,000 PLN A year. The money will be transferred to the competent office on the basis of the address of the taxpayer’s residence, i.e. to the same tax office where the taxable person settles the income tax.

Exit tax

Exit tax, or move tax, is designed to discourage entrepreneurs from moving their seats or assets to other countries. The introduction of exit tax results from the European Anti-Tax Abuse Directive. In many cases, business relocation was purely fiscal and the main objective was tax optimization.

This tax began to apply from 1 January and includes entrepreneurs and natural persons moving business or private property abroad. The basic tax contribution is 19%, But there's a softer plan. 3% At stake.

Under new regulations, a company moving abroad will pay 19% tax and a natural person who does not run a business, accounting for PIT, 3% or 19% - from financial assets above 4,000,000 PLN. The tax will apply to people who want to move out of Poland, previously living in our country at least 5 years.

Exit tax will include a potential profit from held securities, investment funds and shareholdings in companies. The tax will charge companies that transfer their assets abroad, so that the income generated by it will not be taxed in Poland.

Relief for bad debts

Since the beginning of the year 2019, new rules on the use of relief for bad debts have entered into force.

Act dated 11 March 2004 on tax on goods and services (Journal of Laws of 2004, item 535), After the amendment, it contains many simplifications that taxpayers will be able to benefit more quickly from the relief for bad debts in the absence of payment arrangements by the counterparty.

The Act also assumes that thanks to new regulations in the pockets of entrepreneurs will be around 4,000,000 PLN in the coming years 10 years. The new rules primarily cover the small and medium-sized enterprises sector, which is why the new regulations are called the SME package.

From 1 January 2019 a shorter period has entered into force after which the claim is deemed to be irrecoverable. To date, the deadline has been 150 days from the date of expiry of the payment deadline specified in the contract or invoice.

Since the new year, the deadline has been shortened to 90 days, and entrepreneurs will be able to benefit more quickly from the relief for bad debts and lower the VAT due earlier, so debtors will be forced to correct the VAT deducted earlier than now. If the claim is similar to that arising before 1 January 2019, i.e.

those claims which arose before the date of entry into force of the new rules, taxpayers will also be able to benefit from the new rules on these claims.

With the changes to tax law that entered into force at the beginning 2019, equity financing will be more beneficial for entrepreneurs and the Ministry of Finance wants to offer the possibility of leaving capital in companies for development

Equity financing

With the changes to tax law that entered into force at the beginning 2019, equity financing will be more beneficial for entrepreneurs, and the Ministry of Finance wants to offer the possibility to leave capital in companies for development.

The government therefore wants to eliminate the differentiation between the way activities are financed.

Within the framework of the National Interest Deduction, a new solution is envisaged in tax laws, which gives the possibility to increase the cost of obtaining revenue by the equivalent of the cost of debt financing such as interest on loan, when even the actual costs were not incurred.

Where the source of the company's financing is payments made by shareholders or by so-called retained profits, the costs of raising capital may be the tax costs in the value corresponding to the amount of the shareholder's contribution to the company or the profit transferred to the reserve / reserve capital and to the product of the NBP reference rate applicable on the last working day of the year preceding the tax year (currently rising 1.5%) increased by 1 percentage point.

The principle of accounting for own financing costs as a cost of obtaining revenue will be to be able to identify the likely costs of financing with equity in the cost of obtaining revenue. The relief will be granted in the year of the payment of the aid or the transfer of the return to reserves and in the year of the payment of the aid.

two subsequent years, with an annual limit of theoretical interest on tax costs 250,000 PLN

Taxing cryptocurrency

To amend tax law in 2019 there is also simplification of rules on the taxation of trading in virtual currencies. Changes are addressed to both entrepreneurs and individuals.

Tax payers investing in cryptocurrency had a difficult task so far, and the Ministry of Finance threw them under their feet, at the same time leading to the expatriation of Polish virtual currency exchanges, which continue to operate in more cryptocurrency-friendly countries such as Malta.

Changes in cryptocurrency taxation were necessary as the rules on cryptocurrency taxation were not decent and led to ‘storming’ among investors and major problems with the real assessment of the tax due. Persons who traded cryptocurrency were charged 18% or 32% tax on the sale of property rights, and at the same time they were required to discharge 1% tax on civil acts, on each transaction.

For those who have made a number of transactions, this meant that there were tax obligations that were repeatedly higher than their profit from the transaction. However, the government decided to regulate the cryptocurrency issue and to include revenue from the trading of virtual currencies in income from cash capital.

Revenues of economic operators shall be taxable, as in this case the conversion of virtual currency to goods or services, etc. The tax burden of this title is then 19%. Taxes are not subject to exchange transactions one virtual currencies for others.

Debt to equity conversion

Amendments to the PIT Act dated 26 July 1991 on personal income tax (Journal of Laws of 1991, item 350), CIT dated 15 February 1992 on corporate income tax (Journal of Laws of 1992, item 86) and some other laws, they introduce changes in the cost of obtaining revenues shown in connection with the conversion of debt into capital. The provisions shall enter into force which, in accordance with their wording, if the non-monetary contribution is the subject of a non-monetary debt owed to the contributor in respect of a loan previously granted by that entity to the company, the taxable person contributing to such a contribution may include in its revenue costs a value corresponding to the amount of the loan previously granted, but not higher than the value of such debt as determined on the date of its transfer.

Capital companies in the course of their business activities often benefit from financial support for capital-intensive investment projects.

The fastest and cheapest form of obtaining the necessary cash is loans granted to such companies by its own partners. There is no obligation to pay tax on civil acts in such a case.

It also happens that after the expiry of the time for which the loan agreement was concluded, the company does not have the funds it could reimburse the shareholder – the lender. In such situations, it is worth considering the process of converting the loan into share capital of a capital company.

The costs of obtaining revenue will be eligible for a contribution which corresponds to the amount of the loan previously granted, but not higher than the one accepted by the parties, i.e. the transferor and the company. The value of such a claim must be specified at the date of its payment.

Where the subject of a monetary contribution is an own claim previously credited by the contributor to the income due, the taxable person making the contribution shall be able to credit it with the cost of obtaining income. The conversion of debt into capital results in non-monetary income, which generates tax revenue.

Under this assumption, taxable persons should be entitled to recognise the value of the converted debt. In the year 2019 new rules are introduced on the cost of obtaining income on the delivery of the debt, as the amount of the converted loan or other receivable previously included in the revenue due.

The new rules apply to revenue (income) obtained from 1 January 2019.

To pay benefits to 2,000,000 PLN we may benefit from the exemption or collection of the tax at a lower level resulting from the official receipt certificate, except that the taxpayer must exercise due diligence in verifying the right to exemption or the right to a lower rate

Tax at source - new rules

From 2019, The new arrangements for the settlement of the withholding tax affect practically all its areas. The rules concern the principles of due diligence, the new tax collection procedure, the introduction of a tax refund procedure, or the extension of the definition of the so-called ‘real recipient’.

Payments above 2,000,000 PLN in principle, they collect the tax and the procedure for its possible recovery if it has been unduly or more than due. However, under certain conditions, tax collection may be exempted by making an appropriate statement or requesting opinions with the tax authority.

Note that the concept of due diligence for the time first it appears explicitly in relation to the provisions of the Income Tax Act at the same time without defining any definition of the statutory concept of due diligence which constitutes a kind of news in terms of CIT and PIT settlements.

The advantage will be to avoid the need for foreign counterparties to apply withholding tax. The Act provides that the Authority will be able to check the conditions for reimbursement by requesting tax information from another country's authority, as well as carrying out a tax check in the territory of the country where the taxpayer is established.

In case of non-compliance with due diligence requirements, sanctions will be imposed in the form of an additional tax liability of 10% the tax base.

These are some of the many changes in the tax system's legislation that come into force. 2019, to seal the tax system and to combat tax avoidance.

Author:

Andrzej Dmowski

Lawyer and Doctor of Legal Sciences of the University of Warsaw. From 2011 one from Corporate Management Partners Russell Bedford Poland. Previously on the BDO advisory network, as well as Deloitte & Touche. Author of the book “Transfer Prices”, co-author of the commentary “The Corporate Income Tax Act”, author of many publications on tax law.