End of January 2018 has been released first safety opinion reference no. DOK4.8011.5.2017. The head of the KAS stated in it that the payment was close 6,000,000 PLN the manager of the store in exchange for the good financial results of the facility managed by him has business reasons and is not tax avoidance.
According to the facts indicated, the company In 2010 concluded with her employee (the store manager) separate from the contract of employment “the contract concerning participation as a result of the store”.
According to its provisions, the employee made payments to the Company's account in the amount 50,000 EUR and thus gained the power to participate in the Company's profits, while at the same time providing that in the case of inferior financial results of the Company against the background of competition, it would lose the funds invested.
In 2017 the employee was paid a profit of close to 6,000,000 PLN.
From 1 January 2018 new rules on taxation of derivatives of financial instruments are in force.
The company indicated that the payment for the implementation of the law resulting from the contract to the employee is subject to a tax rate of 19%, because it is the income from the cash capital in question under Article 17(1)(10) PIT Act. Therefore, the income obtained will not be taxed at the rate 18 or 32%.
The company had positive individual interpretations showing that this benefit was covered by a rate of 19%, However, the interpretation does not protect against the use of Article 119(1). Tax Ordinance.
It states that an act carried out primarily in order to obtain a tax advantage contrary to the subject matter and purpose of the provision of the tax law in question does not result in a tax advantage being obtained if the method of action was artificial (avoidance of taxation).
Therefore, the company requested a protective opinion within the meaning of Article 119 Tax Ordinance.
The head of the KAS considered that the contract in question does not have tax avoidance features. The activity was not primarily carried out in order to obtain a tax advantage, as it was intended to motivate the manager to run the store in such a way that it would achieve results better than competition, introducing an additional incentive element in the form of a risk of loss of his capital.
Contracts could not be attributed to the characteristics of artificiality, either, because the achievement of the economic and economic objectives of the Company would not be sufficiently effective in the case of a ‘traditional’ employment contract, including a bonus contract. In the bonus system, liability on the part of the employee is limited to the failure to obtain an additional benefit in the event of failure to meet the objectives pursued.
Consequently, it was confirmed that the payment of the profit from the contract ‘is in essence the execution of the derivative financial instrument’.
It should be stressed that 1 January 2018 new rules on taxation of derivatives of financial instruments are in force.
Author: Aurelia Ulita
Younger consultant in the tax advisory department. From 2017 related to the firm Russell Bedford Poland. A fifth year student of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. She gained her professional experience in renowned Lublin tax law firms. Its professional interests are tax law and, in particular, income taxes.