Ministry of Finance on 25 August 2022 addressed to the Sejm a draft law amending, inter alia, the Corporate Income Tax Act (hereinafter ‘CIT Act’). According to the project sent to the parliamentary work, documentary obligations on so-called indirect Paradise transactions are to be excluded.
According to Article 1(6) point (b) of the draft amending act will be repealed Article 11o(1a)(1b) The CIT Act, and this means the removal of all records of indirect Paradise transactions.
In turn, in accordance with the proposed transitional provisions, this amendment is to apply retroactively with effect from the date of 1 January 2021
A few days before the project was referred to the parliamentary work, the MF published its position with regard to the comments made during the public consultation to the submitted project, which shows that the amendment to exclude the obligation to document indirect Paradise transactions is a result of taking into account the comments made in that consultation.
MF's comments on the draft amendment of the CIT rules on indirect transactions contain information on the planned repeal of the rules concerning reporting of indirect Paradise transactions. The MF took into account comments on the exclusion of domestic transactions from the obligation to document indirect Paradise transactions.
The rationale for such simplification is, inter alia, the fact that national entities carrying out direct transactions with tax havens are already required to draw up TP documentation and report to TPR in any case above 100,000 PLN (changed to 200,000 PLN).
Thus, tax authorities already having information about such a taxpayer have all information about its transactions with other national entities (e.g. JPK and other systems).
In the explanatory memorandum to the bill, the authors of the amendments indicated that the existing and previously proposed solutions for indirect Paradise transactions were not proportionate to the objective pursued by:
„Interpretative doubts and practical difficulties in identifying the actual owner of the claim and applying the presumption of his residence in the tax paradise could also lead to obtaining information that would not reflect the actual indirect relations of Polish entities with tax havens. This would significantly reduce the usefulness of such information for a sound risk analysis by the KAS.’
Repeal Article 11o(1a)(1b) with effect from 1 January 2021 means that already this year, by drawing up tax records for the year 2021 taxpayers will not be required to obtain information on transactions carried out indirectly with tax havens.
The provisions on direct Paradise transactions remain in force, but in this case the documentation thresholds will be increased from the existing threshold. 100,000 PLN, to:
- 1) 2,500,000 PLN – in the case of a financial transaction,
- 2) 500,000 PLN – for transactions other than financial transactions
The adoption of these changes will result in a significant reduction in the volume of transactions subject to documentation obligations, and, above all, taxpayers will avoid the need to carry out a cumbersome identification of indirect transactions and to obtain information about them, which we have previously informed.
Source:
Draft Act amending the Corporate Income Tax Act and some other laws addressed to the Polish Parliament on 25 August 2022, printing DKPL.WK.0610.2.122.2022.ACY(12).