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Newsletter No. 05/2020


1) SLIM VAT – subsequent changes to the VAT system

A simple, local and modern (“SLIM”) VAT initiative aims to simplify and modernise Polish VAT. It is a solution prepared by the Ministry of Finance to be introduced from 1 January 2021.

The bill has emerged as a result of dialogue with businesses on how to simply VAT settlements. It also addresses the market proposals and meets the expectations of businesses, namely it reduces redundant and burdensome formal obligations hindering businesses from meeting their VAT obligations.

The reform introduces changes to VAT in four areas: simple invoicing, facilitations for exporters, common exchange rates for VAT and CIT/PIT purposes and other financial advantages.

The reform is currently being drafted, and we hope that the Ministry of Finance, having captured the voices of businesses and experts, will introduce optimum solutions from a business perspective.

2) An amendment to the AML Act – what does it mean for businesses?

The entry into force of an amendment to the Anti-Money Laundering (AML) Act proposed by the Ministry of Finance will mean extra obligations for businesses. Some of the amendments will require the introduction of substantial systemic improvements.

A material amendment, from a business perspective, is the modified approach to applying security measures for customers. The new rules require the customers and their beneficial owner be identified, and that the identity is verified. It also involves monitoring ongoing transactions to determine the final customer’s risk level. Under the amendment, financial security measures must be applied, including in the event of any change in the nature or circumstances of the business relationship, or any change to the customer or the customer’s beneficial owner.

Certainly, the proposed amendments entail additional obligations placed on the shoulders of institutions operating under the AML regime. Additionally, some of the amendments, specifically those concerning the application of financial security measures, will require the institutions to implement certain systemic improvements and to redefine their target operating model. At the same time, it should be stressed that the key provisions of the bill have been challenged by the Legislative Council, and this will affect the final shape of the amended act.

3) CIT Act amendment – “Estonian CIT”

The Polish government has announced the introduction of an amendment to the CIT Act as of 1 January 2021. Under the amendment, a new tax measure, dubbed the “Estonian Corporate Tax”, will be introduced to the Polish tax system.

The first assumption behind the introduction of the “Estonian CIT” is that enterprises will be relieved from paying corporate income tax as long as they refrain from distributing dividends and keep their profits reinvested.

The new regulation will be addressed to small and medium-sized capital companies:
  • with revenues below PLN 50 million;
  • with at least three employees;
  • with their operating revenues accounting for at least half of total revenues;
  • whose shareholders are natural persons only;
  • who do not hold shares or interests in other entities (including foreign entities); and
  • reporting capital expenditures.

In its Polish form, the Estonian CIT model will be available in two options. The first is a full (comprehensive) taxation model applicable to distributable income, like in Estonia. The second option allows allocations made to a special investment fund (account) to be recognise as deductible costs.

Taxpayers can choose a taxation model for four years and extend it for further four-year terms. The extension may be granted provided that a given taxpayer continues to meet the aforementioned criteria in the last year in which the chosen model applies.

On 12 August 2020, the Government Legislation Centre published the proposed bill and submitted it for public consultations with experts and business operators. Opinions on the proposal were accepted until 23 August 2020 and are currently being reviewed. For this reason, the bill may be subject to further changes.

4) New IP courts are now open

1 July 2020 saw the introduction of specialised Intellectual Property (IP) courts set up to review all IP-related matters.

In principle, these specialised IP courts will have jurisdiction over disputes involving copyright and industrial property rights, as well as unfair competition claims and certain disputes over the protection of personal rights, for example related to advertising or the promotion of goods and services or scientific and inventive activities. The affected parties can enforce their rights by bringing a lawsuit in the new courts for a trademark or patent infringement, the misappropriation of a trade secret or an unfair competition practice.

IP disputes will be heard in the first instance by district courts and by courts of appeals in the second instance, in five locations. The IP competence will be assigned to regional courts in Katowice, Lublin and Gdańsk, as well as regional courts and courts of appeals in Poznań and Warsaw.

5) The government wants to reduce the minimum distance between a wind turbine and homes by four times

The Ministry of Development intends to propose 500 metres as the mandatory minimum distance between a wind turbine and the nearest residence, where the local municipality has lifted the 10H rule within its area. Currently, the setback distance is less than 10 times the turbine height.

In accordance with the current proposal of the ministry, wind turbines could be located purely on the basis of a local zoning plan covering the entire area within the 10H around the planned wind turbine. While, depending on the results of an environmental impact assessment report and in accordance with the local zoning plan, municipalities may accept a different setback distance for a wind farm, it must be at least 500 metres away from the nearest houses. The ministry has emphasised that the 500-metre distance for turbines results from scientific studies declaring it a safe distance that ensures compliance with noise limits.

The Minister of Development announced several weeks ago that the rules will be changed. She declared that her department was working on an amendment to the Act on Investments in Wind Farms that, after broad consultations, would be ready in the second half of this year. Minister Jadwiga Emilewicz stated that the new provisions should enter into force as of 1 January 2021.

6) 326 thousand companies registered 563 thousand beneficial owners

326 thousand companies and partnerships have registered 563 thousand beneficial owners in the Central Register of Beneficial Owners (CRBO). As a result of failings in the registration process, the deadline for registration was postponed from 13 to 17 July. Despite that, not all companies and partnerships complied with their statutory obligation, for which they may be severely fined.

A fine for failing to report information about beneficial owners in a timely manner may reach PLN 1 million. Nevertheless, over 100 thousand companies and partnerships have not submitted reports. Based on information from the Ministry of Finance, as of 20 July 2020, there were only 326 thousand companies and partnerships who have registered 563 thousand beneficial owners. However, there are almost 450 thousand business entities registered in the National Court Register. The Ministry of Finance has announced that it will verify whether the companies and partnerships required to submit their report have complied with their obligation, and whether they have identified their actual managers.

The obligation to submit a relevant report and update the reported information in the CRBO is placed on partnerships, limited partnerships, joint-stock partnerships, limited-liability companies and joint-stock companies, except for public companies.

7) The court not to impose fines for an incomplete SENT declaration

The relevant case begun in May 2018, when customs and tax officers, in the course of a traffic inspection, found that a carrier had an incomplete SENT notification form (missing road licence number) within the meaning of the Act on Road Transport dated 6 September 2001.

The carrier was punished with a fine of PLN 5,000 and asked the Ombudsman for Small and Medium-sized Enterprises (SME Ombudsman) to intervene.

The Regional Administrative Court in Warsaw, in its decision (case No. V SA/Wa 1728/19) did not share the opinions of both instances that the waiver of a fine should be treated as a special measure, since granting such relief could put the carrier into a privileged position compared with other carriers who comply with their obligations under the SENT Act, or those who paid similar fines for non-compliance.

The Regional Administrative Court in Warsaw stated that, in the given case, no other practice has been identified except for the erroneous (incomplete) completion of the SENT notification form, which is contrary to the SENT Act. At the same time, the Regional Administrative Court in Warsaw found that the position of the authorities presented in this case was contrary to the rules of procedure under the Tax Ordinance (i.e. the rules enhancing mutual trust between the competent authorities and the rules under which the authorities should take all necessary steps to clarify the facts of a case), while building trust between citizens and businesses in state institutions lies in the public interest.

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