A project appeared on the pages of the Government Legislative Centre dated 24 August 2018 Act amending the Personal Income Tax Act, the Corporate Income Tax Act, the Act – Tax Ordinance and to amend some other laws. The project introduces a number of changes to the tax laws aimed at further sealing the tax system.
The tax revolution will affect not only large corporations and international entities, but also small entrepreneurs, having a car used for private purposes or a rented or leased car. The new law also introduces solutions to promote innovation and research and development that are then used in business.
System sealing
Key issues covered by the tax sealing project.
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- Exit tax , i.e. the introduction of taxation on income from unrealised capital gains, in relation to the transfer of assets by the taxpayer to another State, including a foreign establishment or a change of tax residence.
Taxation of income from unrealised profits is essentially related to cross-border transfers of assets ‘within the same taxpayer’. According to the PIT tax scheme for taxpayers, two Rates — 3% tax base (when the tax value of the asset is not established) and rate 19% in other situations.
For CIT taxpayers, the tax rate is to be 19% the tax base. The tax base on income from unrealised gains is to be the sum of the income from unrealised gains established for each asset. In turn, the income from unrealised profits is intended to constitute an excess of the market value of the transferred asset, including the resulting change in the tax residence, set at the date of its transfer above its tax value.
The essence of exit tax and its effects has already been spoken of. Andrzej Dmowski Here. We will continue to analyse this issue.
- The ATAD Directive , i.e. changes to the general avoidance clause in connection with implementation Directive 2016/1164 of 12 July 2016, laying down rules to counter tax avoidance practices which have a direct impact on the functioning of the internal market.
Projectors shall amend the text of the anti-tax avoidance clause so that it may apply where the principal or one the main objectives of the operation will be to obtain a tax advantage contrary to the subject matter or the tax law in question.
The proposed amendment is to be in line with the inclusion already present in Polish tax laws, in which other provisions of Community law were implemented in advance, providing for specific anti-tax avoidance clauses (e.g. Article 12(13) and Article 22c Act dated 15 February 1992 on corporate income tax).
The current anti-tax avoidance clause for its application requires that the tax advantage obtained is contrary to the subject matter and purpose of the tax law (conjunction).
In turn Article 6(1) The ATAD Directive indicates that the clause can be applied if the tax advantage is contrary to the subject matter or purpose of the applicable tax law (total alternative).
The ATAD Directive does not narrow down the possible contradiction only to a single provision of the tax law, but refers to the applicable tax law.
It is therefore proposed that the amended content Article 119a Tax Ordinance corresponds to the acceptance resulting from Article 6(1) the ATAD Directive, which will enable the wider application of the clause to taxpayers.
The proposal provides for repeal Article 119e Tax Ordinance and the introduction of a uniform definition of ‘tax benefit’ throughout Tax Ordinance. This issue is also important for reporting tax schemes – MDR
Numerous changes to the provisions of Section IIIA are therefore being made Tax Ordinance to prevent tax avoidance. In this regard, attention should be paid to the following issues:
1) the project provides for repeal Article 119e Tax Ordinance and the introduction of a uniform definition of ‘tax benefit’ throughout Tax Ordinance. This issue is also important for reporting tax schemes – MDR. The ‘tax benefit’ will consist of:
- • failure to establish a tax liability, withdrawal at the time of the tax liability or reduction of its amount,
- • the rise or inflate of the tax loss,
- • the existence of an overpayment or right to refund or an increase in the amount of overpayment or reimbursement,
- • the absence of an obligation for the payer to collect the tax if it is due to the circumstances indicated in point (a);
- 2) a number of powers are introduced for the Head of the KAS on matters relating to the conduct of tax avoidance proceedings;
- The draft envisages limiting the possibility of issuing individual interpretations of tax avoidance rules. According to the drafters, despite the introduction of an institution of a safety opinion, there is no provision in Tax Ordinance, which would exclude the explicite possibility for taxable persons to ask questions in the form of an individual interpretation of tax legislation concerning the application of the anti-tax avoidance clause (although such an exemption can be derived from the interpretation of the system rules governing those institutions). According to the drafters, there are no rules excluding the possibility of applying for an individual interpretation in relation to the provisions of specific clauses or contractual advantage restrictive measures, although substantive tax law contains provisions similar in its nature to the general anti-tax avoidance clause and is therefore presented as a reasonable introduction of rules which will limit the possibility of obtaining individual interpretations in relation to the possibility of applying the anti-tax avoidance clause as well as so-called small anti-tax avoidance clauses;
- one the project is intended to introduce an additional tax liability in relation to tax avoidance, the application of contractual advantage restrictive measures or transfer pricing provisions. The tax authority, when issuing its decision under these provisions, will determine an additional tax liability corresponding to the fraction of the tax advantage found in the proceedings;
- the anti-tax avoidance clause may be applied to payers;
- the transfer of the fault from the payer to the taxable person shall be prohibited where there are links or trust structures;
- The draft assumes that the right to make an adjustment to the declaration taking into account in its entirety the legal assessment relating to tax avoidance and contained in a provision based on Article 200(3) Tax Ordinance, will benefit the website only one once, after service first the decision on the time limit for comment on the evidence collected.
- Introduction of the obligation to provide tax authorities with information on tax schemes (MDRs)
In Chapter III Tax Ordinance, after chapter 11, a new Chapter 11a ‘Information on tax schemes’ is added, which are the arrangements:
(7.1) meeting the main benefit criterion of the new Article 3(16) (a) increase in the amount of excess input tax due, within the meaning of the provisions of the Goods and Services Tax Act, to the transfer to the next settlement period, (b) failure or withdrawal at the time of the obligation to draw up and transmit tax information, including information on tax schemes,
(7.2) having a general exploratory characteristic, or
(7.3) having a specific distinguishing or other specific distinguishing characteristic.
Both the general exploratory feature and the specific exploratory feature are defined in the project definitions. It is important for legal and tax advisory professions to define a promoter, as it is a natural, legal or organisational person without legal personality, in particular: tax adviser, lawyer, legal adviser, bank employee or other financial institution, advising customers, including where they do not have a place of residence, seat or management in the territory of the country which develops, offers, makes available, implements or manages the implementation of the arrangement.
Subject to the content of the recipe Article 86b(1) The OP promoter is required to provide the Head of the KAS with information on the tax scheme within the time limit 30 the days following the provision of the tax scheme or the implementation of the tax scheme or the following day after preparation for implementation of the tax scheme, whichever is the earlier.
Come on. Under section 4 recipe Article 86b(1) Projectors' OPs indicate that where the promoter's transmission of information on a tax scheme other than a standardised tax scheme (i.e.
essentially one that can be implemented in the majority or in many entities) would infringe the obligation to maintain a legally protected professional secrecy and the promoter has not been exempted from the obligation of secrecy in this respect, the promoter shall inform the recipient in writing within the time limit referred to.
section 1, on the obligation to transfer the tax scheme to the Head of the National Tax Administration, and transmit to the recipient the data in question under Article 86f(1) concerning the tax scheme.
However, in the situation in question Under section 4, the promoter is bound by professional secrecy and is thus obliged to notify the Head of the National Tax Administration of the date on which the tax scheme was made available and of the number of entities that informed about the obligation to submit to the KAS information on the scheme as the beneficiary of such a scheme.
While such a regulation does not directly affect the professional secrecy of the legal and tax professions, it is not difficult to see that the mere obligation of advisers to inform the KAS of the number of possible ‘schemes’ can negatively affect the perception of such advisers, whether by their own customers or by their own environment, which supposedly defines such entities as ‘black sheep’, but then the solution (such as the establishment of SKA companies) is avalanched and applied by almost everyone on the market.
Advisors are most often guided by the arrangement of relations, transactions or other economic assumptions of their customers most favourably also in the tax area, although they assume that there is no obligation to pay the highest possible taxes and that it is possible to rationalise their level within the limits of the applicable law. Unfortunately, the new MDR obligation raises considerable concerns about the continuation of this line of approach to optimise taxation.
The penalties for the lack of information on tax schemes are generally laid down in the Tax Penal Code, where Article 80d the following is added: Article 80e the following:
„Article 80e. section 1. Who is against obligation:
- 1) does not provide the competent authority with information on the tax scheme, or
- provide information after the deadline,
- 2) does not forward to the competent authority data relating to the entities to which the standardised tax scheme has been made available, or forward it after a deadline, shall be fined until 720 daily rates.
- section 2. The same penalty is imposed, who, contrary to the obligation to submit information,
- spoken under Article 86j(1) Act Tax Ordinance.
- section 3. Specific penalty Under section 1 be subject to who does not submit the declaration referred to to to the competent authority under Article 86j(5) Act Tax Ordinance.
- section 4. Who, against Article 86i(4) Act Tax Ordinance use
The annulled NSP shall be fined until 240 daily rates.
section 5. In the event of a minor offence, the perpetrator of a prohibited act specified Under section 1 point 1-2, shall be fined for misconduct.’
In particular, the financial implications for large advisory firms are foreseen in the event of failure to comply with the obligations to introduce a scheme reporting procedure.
In the event of failure to comply with the obligation to establish and adopt an internal procedure to prevent non-compliance with the obligation to provide information on tax schemes, promoters, promoters or actually paying them remuneration, whose revenue or costs, within the meaning of the accounting rules, established on the basis of the accounts kept exceed the equivalent in the year preceding the financial year 8,000,000 PLN – are subject to a financial penalty imposed by the Head of the National Tax Administration, by decision, not more than 2,000,000 PLN.
On the other hand, in the case of the act mentioned under Article 80e(1) Act of the Tax Penal Code by a promoter who is a natural person employed or actually receiving remuneration from the entity concerned under Article 86k(1), who failed to fulfil the obligations in question under Article 86k, the monetary penalty in question Under section 1, may be imposed not more than 10,000,000 PLN.
- Changes in withholding tax (WHT) where the taxable person from the same payer in one tax year, the amount will exceed exceeding 2,000,000 PLN.
In the opinion of the project promoters, the analysis of the existing practice, including the results of the checks carried out, indicates the need to adjust the approach to the collection of withholding tax, in particular due to doubts as to the actual power of the entity identified as the actual beneficiary to benefit from the privileges of international agreements on the avoidance of double taxation and non-imposing of withholding tax. As regards the definition of the real beneficiary, the emphasis was on: (1) actual business activity in the country of residence (2) to bear the economic risk associated with the loss or loss of the value of the claim in question, and (3) the possibility to decide independently on the allocation of the receivable received.
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The proposed amendment will be based on the fact that, in place of the relief (tax exemption or reduced tax rate) already applied at the time of payment, the tax is to be collected and returned by the payer to the tax office and only after the authority has verified the right to benefit from the advantage of the withholding tax exemption, it will be possible to reimburse that tax, also to the payer.
Changes in withholding tax will concern a situation where the taxable person from the same payer in one tax year, the amount will exceed exceeding 2,000,000 PLN. Overshooting the threshold two one million PLN will result in the obligation to calculate, collect and pay the tax by the payer using the rates laid down in national law (depending on the status of the taxpayer these will be the rules contained in the CIT or PIT Act).
At the same time, the proposed rules introduce signalled simplifications, which even if the proposed threshold is exceeded two one million Zloty, the payer will be entitled to apply preferential withholding tax at the time of payment:
(1) first the simplifications to be applied to both income tax laws will consist in the payer making a statement to the tax authority under the rigour of criminal liability that the payer has the documents required by the tax law entitling him to apply preferential tax rules (e.g. reduced rates set out in the double taxation agreement).
This statement will also include a confirmation of the lack of knowledge of the existence of circumstances excluding the possibility of non-collection under tax law. Proposed solution – i.e.
the possibility for the payer to make a statement in order to apply the existing relief at source mechanism (withholding authorisation) to simplify the settlement of the with-source tax where both sides of the economic relationship (i.e.
the payer and the taxpayer) have confidence in each other and knowledge of the fulfilment of the conditions for applying preferential tax rules (e.g. due to long-term and transparent economic relations).
Before making such a declaration, the payer shall verify that there are no circumstances that exclude the possibility of non-collection under the relevant double taxation agreement, the application of exemptions or rates resulting from specific provisions and double taxation agreements;
(2) second simplification only applies under the provisions of the CIT Act and will apply in the case of exemptions envisaged Under Articles 21(3) and 22(4) This bill, i.e. exemptions implementing the provisions of the EU Directives. This simplification consists of the application of preferences on the basis of the tax authority’s opinion on the application of the exemption.
Principle 3P in practice
In addition to the above issues concerning the principle of sealing the tax system, the proposed changes are intended to simplify the settlement and eliminate doubts about legally unclear rules and to introduce a system of tax incentives for the development of entrepreneurship. Tax simplification was announced by the Minister of Finance under the motto 3P – simplicity, transparency, friendship.
Designed recipe Article 10(5) The PIT Act assumes that in the event of sale of immovable property or certain property rights acquired by inheritance, 5-the summer period will be calculated from the date of acquisition by the deviator, and not as it has been so far since the end of the year in which the acquisition took place. The project provides for the possibility to be credited with the tax costs of the sale of immovable property or certain property rights.
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The bill provides for the introduction of a favourable tax solution in the PIT and CIT Act for entrepreneurs who obtain income from commercialisation of intellectual property rights created or developed by them. The solution proposed in the draft law consists of preferential taxation 5% The tax rate of income obtained by the taxable person from intellectual property rights, which the taxpayer owns, co-owner, user or has the right to use under a licensing agreement and which is protected under applicable national or international law by, inter alia, patents, additional protection rights on a utility model or the right to register an industrial design.
The taxpayer who wishes to benefit from the proposed preference will be required to keep detailed accounting records in such a way that the tax base can be calculated, including the link between the costs incurred for research and development with the revenue generated from IP rights arising from the performance of the work.
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9% CIT rate. The draft provides for a reduced tax rate (9%) will be eligible for revenue other than capital gains. This rate is to be charged to those taxable persons whose income in a given (current) tax year does not exceed the amount expressed in PLN corresponding to the equivalent 1,200,000 EUR.
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Introduction of an incentive to leave development capital in companies by increasing the fiscal attractiveness of own funding (NID). CIT currently has more tax advantages in terms of financing investment in foreign capital, and it is therefore proposed to eliminate the diversification of financing of investment in equity or foreign capital by introducing an opportunity to increase the cost of obtaining revenues in the case of equity financing (share premium, retained earnings) by the equivalent of debt financing costs (although these costs were not actually incurred).
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Specific arrangements are introduced for economic operators to acquire packages of claims.
After the amendment of the provisions, the costs of the acquisition of the claim or the packages of the claim will be recognised as being ‘right’ in the amount corresponding to the amount of the revenue obtained from it, until the revenue from the repayment of the debt (the package of the claim) is equal to the amount incurred on its (his) acquisition of expenditure (i.e.
in other words, until all expenses for the acquisition of a specific claim or a set of claims have been settled. This will be a major difference compared to the current accounts in the event of a partial payment for the claim and the cost being determined in proportion to the payment received.
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The introduction of an alternative method of taxation for the issuance of Eurobonds, where the proposal is based on the possibility for the taxpayer to choose the form of taxation of these incomes (i.e. a tax collected at source from the bondholder) or the form of taxation proposed in the draft, the assumption of which is that the issuer taxpayer assumes the tax obligation in this respect.
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The introduction of separate rules governing the taxation of virtual currency income. Revenues from the trading of virtual currencies will be eligible according to the income from cash capital (Article 17 PIT or capital gains (Article 7b CIT Act). For this purpose, specific tax rules will be laid down.
This revenue will not be combined with other income from cash capital (capital gains). Eligibility to the source of revenue – money capital will be made even if the taxpayer achieves revenue from trading virtual currencies in the course of its business.
Revenue will include revenue from the sale of virtual currencies on the stock exchange, in the cantore and in the free market, i.e. revenue from the exchange of virtual currency to the means of payment. Equally with the sale of virtual currencies, payment of such currencies for goods, services, property rights, liability will be treated.
The tax costs will be documented for the acquisition of virtual currencies incurred in a given tax year, but only directly related to the acquisition and sale of virtual currencies.
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Repeal in the PIT Act of the provision governing the right to preferential taxation of the income of spouses and single-parents from the timely submission of a tax return.
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Taxing income from inherited properties or other property rights. Designed recipe Article 10(5) The PIT Act assumes that in the event of sale of immovable property or certain property rights acquired by inheritance, 5-the summer period will be calculated from the date of acquisition by the deviator, and not as it has been so far since the end of the year in which the acquisition took place. The project provides for the possibility to be credited with the tax costs of the sale of immovable property or certain property rights acquired by inheritance:
- • the acquisition (production) of that immovable property or of a specific property right incurred by the inheritance; and
- • debt and inheritance.
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Extending the term of the so-called housing relief 2 to 3 years.
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Changes in the use of passenger cars in business:
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increase to 150,000 PLN the amount of the limit on the value of the passenger car (including electric car) to which it is possible to fully deduct depreciation from the consumption of the passenger car, as well as the corresponding increase in the amount relating to the value of the car adopted for the purpose of calculating the contribution for the insurance of the passenger car which may be included in the cost of obtaining revenue;
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the proposal for a regulation that any expenditure related to the use of a passenger car serving the taxable person for purposes other than economic activity will be included in the cost of obtaining revenue of 50% These expenses.
On the other hand, the possibility of crediting 100% Such expenditure will only apply to the use of a passenger car only in the course of its business, with the taxpayer having to keep records confirming the use of a passenger car exclusively for the taxable person's business (the VAT records will be used in this respect).
If the taxable person does not keep records for VAT purposes, it will also be assumed for income tax purposes that the passenger car is also used for purposes not related to the taxable person's business unless the taxable person is not required under the provisions of the Goods and Services Tax Act to keep such records;
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the introduction of a limit on the cost of obtaining revenue from the use of a passenger car under a lease, lease, lease and other similar contract. The reduction in the inclusion of fees for these contracts in tax costs will be determined by the proportion of the value of the leased car to the amount 150,000 PLN;
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Decommissioning the obligation to make a declaration of choice for rent, sub-rental, etc. in the form of lump sum. The method of taxation of private rental revenues (by tax scale or lump sum on recorded income) is decided by the taxpayer when making first contributions to income tax.
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The removal of the obligation for taxpayers to keep records of revenues generated by private rental and benefiting from taxation on a flat-rate basis on revenues recorded where the amount of revenue is not derived from a lease agreement concluded in writing (not required to keep records).
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Determination of the cost of obtaining the revenue shown in connection with the conversion of debt into capital, by the taxpayer showing the amount of costs incurred.
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Repeal of the obligation to publish in the Court and Economic Monitor information on the registration and deletion of the tax capital group.
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Expand the scope of the exemption of income of closed investment funds or specialised open investment funds applying the rules and investment restrictions laid down for closed investment funds by indicating that, among other things, interest on loans granted to non-legal personality companies (expanding the scope of the provision Article 17(1)(57) point (b) CIT Act).
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Determination of the jurisdiction of the Chief of U.S. payer in the case of the payer's obligation to pay the tax when transferring profit to share capital.
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Determination of the entity exemption for units of the Technical Supervision Office.
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Increase in the amount of the limits included in the cost of obtaining the revenue of contributions to non-compulsory associations of employers and entrepreneurs.
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Extension of the scope of the PIT and CIT exemption on the sale of all or part of the properties of the agricultural holding.
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Allowing the possibility to take account of the use of a copy of the tax residence certificate where the amounts of claims paid to the same entity do not exceed 10,000 PLN each year and the information resulting from a copy of the residence certificate submitted does not give rise to reasonable doubts as to whether it complies with the facts;
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The definition that, in the case of a securities loan, the income for the ‘borrower’ is only a ‘interest element’ understood as the difference between the repurchase price of the security and the price for which it was transferred under such a transaction.
There are therefore a lot of changes planned. They are of great importance in particular for entrepreneurs, so the individual topics will be analysed and discussed by specialists from Russell Bedford.
Author:
Aleksandra Księżyk – Legal advisor, Director of the Legal Department in Warsaw Chancellery Russell Bedford Dmowski and Partners Law Firm sp. k.