Tax on transferred income has been in force recently, since 1 January 2022. Main purpose of introducing a new tax base at the rate 19% was sealing the tax system, avoiding the lack of taxation when transferring funds abroad.
However, the new institution already in the following tax year has been substantially amended. The provisions were clarified in terms of the costs covered by this tax and in terms of the conditions to be covered by the new regulation. Tax on transferred income concerns payments made by Polish entities to related foreign entities or benefits transferred by foreign non-resident establishments located in Poland to the headquarters.
The new standard is addressed to Polish entities conducting transactions with foreign related entities, but it is worth pointing out that such transactions are already subject to a number of tax and reporting obligations.
Under the law amending the Corporate Income Tax Act, a list of expenses which may be regarded as revenue transfer, including advisory, advertising, data processing, orders and controls, guarantees and other services of a similar nature. Fees for the transfer of functions, assets or risks may also be considered as transferred revenue.
In addition to the payment of the statutory titles, it is also necessary to comply with further statutory conditions. According to Article 24aa(2)[1]:
The transfer of revenue shall be considered to be included in the cost of obtaining revenue in the tax year of the costs incurred by the taxpayer to the non-resident or to the management in the territory of the Republic of Poland of the related entity within the meaning of Article 11a(1)(4) with that taxable person, if the following conditions are met cumulatively:
- in accordance with the tax law applicable in the country of residence, management, registration or location of that related entity, the income (income) of that entity obtained from one of the titles listed in section 3 subject to taxation at a rate of income tax lower than 14.25%, calculated according to section 2a and 2b, or exemption, or exemption from taxation with that tax;
- that related entity receives from the taxable person or other companies referred to in Article 3(1), related within the meaning of Article 11a(1)(5) with that taxpayer, of the titles listed in section 3 at least 50% total revenue determined in accordance with income tax or accounting legislation;
- that related entity shall transmit, in any form whatsoever, at least 10% revenue referred to in point 2, to another entity:
(a) including, therefore, expenditure on or deduction from income tax costs, tax bases or taxes in any form, or
(b) if these revenues consist of the profit to be paid, irrespective of the time limit, in the form of dividends or other income from the participation of legal persons;
- sum specified in section 3 costs incurred by the taxpayer in the tax year for related entities within the meaning of Article 11a(1)(4) with the taxpayer, included in the tax year in the cost of obtaining the income of that taxpayer, represents at least 3% the total cost of obtaining the taxpayer's income for that year.
In practice, these regulations lead to the conclusion that taxed on the transfer of income may be borne by costs incurred to a related entity that does not tax those revenues, or will do so through an inefficient rate (i.e. rates below). 14.25%).
The only hope of taxpayers is that the obligation to charge its own income costs only arises if the conditions of Article 24aa(2), And that means you just have to show that you're not. one the conditions to avoid such taxation.
Unfortunately, it should also be pointed out that under the regulation of the new legislation the burden of proof of failure one on the grounds of pregnancy on the taxpayer.
The new tax obligation, without any doubt, will not facilitate business in Poland, nor will it encourage foreign investments.
The new standard is addressed to Polish entities conducting transactions with foreign related entities, but it is worth pointing out that such transactions are already subject to a number of tax and reporting obligations.
In the case of dividend, interest and royalty payments that exceed the amount 2,000,000 PLN, taxpayers are required to collect withholding tax (pay and refund mechanism). There are also documentation obligations in terms of transfer prices (information on transfer prices, local file tax documentation and Master File).
The transfer tax should be assessed as a further financial burden, which at the same time interferes significantly in running a business.