1. Amendments to the National Court Register concerning submission of financial statements
On 12 January 2019 provisions to the National Court Register Act regarding the submission of financial statements changed. Previously, submissions from limited liability and joint-stock companies needed to be accompanied by the qualified electronic signature of a member of a body authorised to represent the company. Since 12 January submissions made by these types of companies can bear the qualified electronic signature of a person who is entered as an individual, or jointly with other persons to represent the company, as well as by a commercial proxy.
From 1 April 2019 submissions will also be able to be made by a legal adviser, attorney or foreign lawyer if the PESEL number of these persons is entered in the system and they are properly authorised.
2. Limited relief for small and new companies
CIT is paid by limited liability companies, joint-stock companies and capital companies in organisation. It is estimated that 440,000 of them will be eligible to pay reduced CIT rate.
In 2017–2018 the reduced CIT rate was 15%; however, Since 1 January this year it has been 9%. It is available to start-ups and small taxpayers, i.e. those whose revenues do not exceed EUR 1.2 million.
The right to pay the smaller tax, unlike in previous years, can be lost during the tax year. If a company’s revenues in one month exceed EUR 1.2 million, it will pay a much higher advance for that month, which will be calculated based on the income from the entire year at the rate of 19%.
In previous years revenues from the sale of goods and services determined the right to a discount. Dividends, sales of shares, replacement contracts, compensation, interest and tax-free income were not taken into account. All revenues are now included, including capital gains.
3. Contractual penalties are not subject to VAT
Companies often conduct negotiations before starting co-operation with a potential contractor. These talks may end in establishing co-operation, which is reflected by signing a contract. It is a common practice that the parties to a contract specify that in the event of a party failing to meet the provisions of the contract the breaching party will be required to pay damages or compensation for the damage suffered.
In this situation doubt arise as to whether the amount of the contractual penalty is subject to VAT or not.
In an interpretation dated 21 December 2018 the Director of the National Tax Information Office stated that if any party suffered actual damage, in the form of delays, failure to enter into a transaction or loss of credibility, a compensatory contractual penalty is payable. These are unilateral actions and do not involve getting anything in return. Nor is it possible to qualify such a benefit as remuneration for the delivery of goods or services. Consequently, there is no basis for issuing an invoice documenting such activity.
4. White list of VAT taxpayers from 1 September 2019
The draft amendment to the VAT Act provides for the establishing of a white list of VAT taxpayers by 1 September 2019. It will be a list of active VAT payers and will replace the existing lists: registered and deleted taxpayers and those restored to the register. The list will allow a contractor to be easily and quickly checked, including bank account numbers. It is to these account numbers that businesses will be required to make transfers for goods or services.
If a taxpayer transfers an amount payable to an account different to the one indicated on the list, and the amount of the transfer is higher than PLN 15,000, then the buyer:
- will be jointly and severally liable with the seller for VAT;
- will not be able to charge the expenses to its tax deductible costs.
Although it is planned that the list will be available from 1 September 2019, these sanctions will apply from 1 January 2020. This is related to the constitutional principle that changes which are to the detriment of taxpayers cannot be made during the tax year. Also, from 2020 payment to a different account number than the one indicated in the list will result in joint and several liability for VAT.
However, taxpayers will have the option of avoiding liability in the event of transferring money to an account not indicated in the list. The requirement will be to provide information about this situation to the Head of the Tax Office within three days from the date of making the transfer.
It will be possible to check a contractor’s details on the white list for the last five years.
5. Ability to reverse the effects of tax avoidance
Taxpayers can voluntarily withdraw from taxation schemes and can reverse the effects of tax avoidance. To do so, an application should be submitted to the Head of the National Tax Administration (KAS). It is subject to a percentage fee, depending on the amount of the tax benefit. The fee cannot be lower than PLN 1,000 and cannot exceed PLN 15,000.
The decision of the Head of the KAS is discretionary, and it sets out how the interested party can reverse the effects of tax avoidance. After the decision is delivered, the interested party has 14 days to submit a correction to the tax declaration.
The reversal of the effects of tax avoidance can affect other entities as well as the one that avoided taxation. Such entities will be able to make corrections within three months from the date of receiving a decision and applying for confirmation of a tax overpayment or refund.
6. Tax interpretation in a dispute with tax authorities
In a recent case a company applied for an interpretation of tax law before the purchase of real estate. It was not sure whether the transaction would be subject to tax on civil law transactions, as the purchase concerned an organised part of a business, or whether it would be subject to VAT on the purchase of real estate.
In the request for an interpretation the company described what it intended to buy and under what conditions. It pointed out that the previous owner of the property had signed lease agreements that would be taken over by the purchaser. It added that there would be no takeover of employees. The company highlighted that in its opinion it would be required to pay VAT on the purchase of real estate, citing the jurisprudence of administrative courts and legal doctrine. In the interpretation the Director of the Tax Office agreed with the company.
The company purchased the property and deducted the input tax. After this, an inspection by the Tax Office showed that the facts described in the interpretation request were different to actually occurred, because:
- the company stated that it was not linked by capital with the seller;
- the company said that the transaction would not result in the taking over of any employees, but these people were handling the buyer’s business.
After the inspection the Tax Office stated that the interpretation does not provide protection. The Provincial Administrative Court in Szczecin shared the opinion of the Tax Office.
However, the Supreme Administrative Court emphasised that neither capital ties nor what happened later could affect the assessment of the situation. It pointed out that a tax interpretation has primarily a protective function, and the actions of the authorities after the issuing of an interpretation cannot undermine it.
7. Judgment of the CJEU on calculation of VAT
In its judgment of 24 January 2019 the EU Court of Justice stated that when calculating input tax for deduction the branches of foreign companies should also take into account the transactions carried out by their head offices.
The verdict concerned the settlements of the French branch of a British company. The branch of a British investment bank operating in France provided both local services enabling the recovery of the entirety of VAT as well as transactions for the head office. The latter transactions were related to operations in the United Kingdom, but in France they were not taxable. For the purposes of calculating VAT the branch only considered the transactions it carried out in France.
The French tax office had a different opinion. The CJEU agreed that the branch should also have taken into account the transactions made by the headquarters if the expenditure of the French outlet were related to it.
In connection with this judgment foreign investors who operate in Poland as a branch should review their accounts as soon as possible, without waiting for the Polish tax office to implement the CJEU’s guidelines. For branches this may mean a significant drop in deductible VAT.