Changes from 01.01.2015 in Poland

It is already tradition that with the new year we face changes in tax law. In the year 2015 we will face primarily works on the new Tax Ordinance Law, which should last few years. We present you some changes in tax law coming in force with the beginning of 2015. The changes coming in force later shall be presented in appropriate time. If you have any questions concerning our positions about presented topics, or would you like to ask about anything else – we are here for you.

Income taxes (the amendments will take effect on 1 January 2015)

1. Thin capitalisation
The amendment to the CIT (Corporate Income Tax) Law introduces changes with regard to the option of treating interest from loans granted by a shareholder to the company as tax-deductible expenses under thin capitalization regime.

The amendment extends the coverage of thin capitalisation regime on indirectly associated enterprises and loans granted by sister companies. The taxpayers who borrows from the abovementioned affiliated entities will have to treat the interest on such loans as not tax-deductible costs if the debt-to-equity ratio exceeds 1:1 (the proportion has been 3:1 so far), unless they apply a new solution in the form of an alternative method introduced in Article 15c of the Law. If one opts for this solution, the limit will be determined as the value of taxpayer’s assets for tax purposes multiplied by the NBP reference rate increased by 1.25 pp.

2. Taxes on income of controlled foreign companies (CFC) – amendments take effect on 1 February 2015
The amendment to the CIT Law with reference to the taxation of CFCs aims to combat possible tax fraud by counteracting the transfer of funds to the associated enterprises situated in the countries which apply harmful tax competition.

A Polish entity will have to include in a taxable base a part of income obtained by its subsidiary with its seat or board located in a country, where taxation level is lower than in the jurisdiction where parent entity resides.

CFC rules will be applied if a taxpayer holds at least 25% of share capital of a controlled company or 25% of the voting rights, and the controlled company is located in a country which, according to the Minister of Finance’s decree, is deemed to employ harmful tax competition, or in a country with which Poland or the EU did not conclude a double taxation convention, and the CFC company obtains at least 50% of its income from dividends and other revenues from participation in a legal person.

The Law also envisages an exemption from the foregoing rules if the value of transactions between the affiliated entities does not exceed the equivalent of EUR 250,000.

Additionally, the taxpayers will have to maintain the register of foreign controlled companies.

3. Participation loan
The amendment to the CIT Law will introduce an additional premise for tax exemption of the dividends and other revenues from participation in a legal person disbursed by the associated enterprises (Parent-Subsidiary Directive).

In order to qualify dividends and revenues from participation in legal persons for the exemption, the disbursed funds must neither constitute the deductible cost for the disbursing company, nor reduce its taxable base, income, or the amount of tax.

4. The amendments to the legislation on transfer pricing
The catalogue of associated enterprises, which have to be included in the transfer pricing documentation has been extended to include partnerships. The obligation to keep tax documentation regarding transfer pricing will also arise in a case of concluding the agreement of partnership with reference to the method of distribution of profit and participation in loss.

5. Tax on retained profit in case of company restructuring 
Following the amendment, if a company has been transformed into a partnership not only its retained profit will constitute taxable revenue, but also the profit transferred to other capital funds in the transformed company. The revenue is estimated as of the day of the transformation.

6. Revenue in a case of a non-cash performance
The amendments introduced in the CIT Law will also address the situation, when the settlement of liability by a taxpayer in entirety or in part (e.g. from a loan, dividend or redemption of shares/stocks) by a non-cash performance will produce taxable revenue in the amount of the fulfilled obligation on the side of the performing company.

7. New specimens of CIT forms
The Ministry of Finance published a new decree, which provides new specimens of forms, also adapting them to the amendments to the CIT Law, which will take effect as from 1 January 2015. The draft specifies the samples of declarations (CIT-6R, CIT-6AR, CIT-9R, CIT-10Z, CIT-11R) returns (CIT-8, CIT-8A, CIT-8B), statement (CIT-5) and information (CIT-8/O, CIT-D, CIT-7, IFT-2/IFT-2R).

8. Lump tax on private use of cars
Beginning from 1 January 2015, the existing system of settling income tax in case of using company car for private purposes will be superseded with the lump sum system. The value of benefit was determined to be PLN 250 a month in a case of using a car with engine capacity up to 1600 ccm and PLN 400 a month for a car with engine capacity over 1600 ccm. At the 18% tax rate, this yields the amount of PLN 45 of a monthly tax in case of smaller engines and PLN 72 of tax in case of bigger ones.

If a company car is used for private purposes for some part of a month, the value of benefit will be proportionally established for each day of using a company car for private purposes at 1/30 of the amounts.

9. New exemptions in Personal Income Tax (PIT)
The amendment to the CIT Law introduces long-awaited income tax exempted items. Beginning from 1 January 2015, the value of a benefit in-kind received by employees in the form of free transport to their place of work by public transport (e.g. bus) organized by their employer will be exempt from tax.
Another significant exemption will be remuneration for the establishment of paid utility servitude. This is very important, because so far the tax authorities have been treating this issue differently.

VAT (the amendments will take effect on 1 April 2015)

1. Place of taxation of telecommunication services 
Following the introduction of a change to taxation, telecommunication services will be taxable in  the place of residence of a consumer and not in the place where a service provider has its seat.

2. Confirmation of taxpayer’s registration
From 1 January 2015, the confirmation of taxpayer’s registration as VAT payer issued by relevant Director of Tax Office will be issued on taxpayer’s request, as not ex officio as it is nowadays.

3. Prolonged term of storing the documentation
Due to the introduction from 1 January 2015 of a special procedure of VAT settlement for electronic, telecommunication and broadcasting services rendered for consumers, the obligation of storing the records of performed transactions by such entities will be prolonged to 10 years. We would like to stress that the prolongation of storage period does not influence the period of limitation of tax liability.

The Tax Ordinance Act (the amendments to take effect in 2015)

The government is pursuing intensive work to introduce fundamental amendments to the Tax Ordinance Act. These will be introduced gradually between 1 January 2015 and 1 January 2017. The key amendments to be introduced on 1 January 2015 are presented below. The major amendments are planned to be introduced on 1 June 2015, however their nature cannot yet be specified. For sure, it may be implied that the planned tax evasion clause will not be introduced to the Tax Ordinance Act during 2015.

1. The way of calculating the terms
In the tax law the rule is that if the last day of a term falls on Saturday or a statutory holiday, the last day of a term falls in a next day after the days free of work. From 1 January 2015 on this rule changes and specific tax laws may set these terms individually. This amendment is aimed especially at VAT Law, where the terms are to be set individually (e.g. from 1 January 2015 the term of filing the electronic returns concerning specific rules of VAT settlement on telecommunication services shall be 20^th day of a month regardless whether this day shall be Saturday or a statutory holiday).

2. Term of storing the tax books
Taxpayers who are obliged to maintain the tax books shall store the books and relevant documents until the limitation of tax obligation. After the introduction of the amendment the specific tax laws may set the terms of storing the books individually (e.g. the taxpayers rendering telecommunication services shall store their records of performed transactions for 10 years).

Excise duty

1. Binding Excise Duty Information
The introduction of instituting the binding Excise Duty Information will be the key modification to excise duty in 2015. The binding Excise Duty Information could refer to a product liable to excise duty or a passenger car. The Director of Customs Chamber will issue it on a taxpayer’s request in a form of a decision. It will remain valid for 3 years of the year of issue and will be binding only for the entity, which requested it.

2. The abolition of a duty to inform the Chief of Customs Office of the selected form of keeping records.
The draft proposes another important amendment, i.e. the abolition of a duty to inform the Chief of Customs Office of the selected form of keeping records. This requirement is currently applied to a number of records whose maintenance is mandatory under the provisions of the Excise Duty Law.

In the current legal situation, a failure to observe the requirement of submitting information on the form of record may produce a risk of imposing penal and fiscal sanction on persons responsible for excise duty settlements. It constitutes the next step to reducing bureaucracy related to excise duty settlements.

Marcin Milczarek
radca prawny/attorney-at-law/Rechtsanwalt
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