The Ministry of Finance presented another package of proposals for taxpayers under the “Polish Deal” program. They focus on facilitating easier settlements and new tax reliefs.
The regulations are to enter into force on 1 January 2022.
The “Estonian CIT”
The Ministry proposes to simplify the regime and to make it more accessible, especially through:
- extension of the catalog of entities entitled to this taxation to include limited partnerships and limited joint-stock partnerships;
- resignation from the necessity to incur specific capital expenditures as a condition for the application of the lump sum provisions, with the possibility of incurring them in order to benefit from the preferential regime;
- resignation from the condition relating to the upper limit of taxpayers’ income taxed with the regime;
- making the deadlines for the payment of tax liabilities more flexible in the scope of the so-called initial correction, and in some cases also lifting the obligation to pay this obligation.
Tax Capital Groups
The draft amendment also provides for simplifications in the field of corporate tax groups (Pol. PGK) in CIT, in particular:
- a reduction, from PLN 500,000 to 250,000, of the average amount of share capital that the companies forming the group must have;
- elimination of the condition of inadmissibility of interconnections existing among the subsidiaries making up the Group;
- resignation from the principle of losing the group status if the required profitability threshold is not achieved;
- facilitating the change of the number of PGK’s members;
- the option of settling losses by PGK prior to its commencement;
- PGK agreement may be made in writing, not in a notarial deed.
Thanks to these changes, a much larger number of entities will be able to form a PGK. This applies to both smaller entities and those belonging to capital groups with an extensive structure.
PGK is an interesting proposition, especially due to the fact that it does not operate under the arm’s length principle in transactions with the entities that constitute it. The Ministry of Finance also plans to enable PGK members to be “one VAT tax” (within the so-called VAT Group).
Consolidation relief
The offer of the relief is a novelty in the Polish tax system.
The taxpayer could deduct from the income the amount of expenses for the acquisition of shares (stocks) in a company having legal personality up to the amount of his tax income from the general source, but not more than PLN 250,000 per year.
It is an additional deduction, independent of the settlement of eligible costs in tax deductible costs.
The following conditions are provided for applying the relief:
- shares (stocks) of a legal person with its registered office or management board in Poland or a country with which Poland has a binding double tax treaty, providing for the exchange of tax information;
- the core business of the acquired company is the same as that of the acquirer or its business could reasonably be considered to be supporting the acquirer’s business (the business of such a company would not be a financial business);
- a taxpayer purchases shares in an absolute majority of voting rights in one transaction;
- both entities must be operational for at least 24 months and not previously related entities.
Eligible costs – giving the right to be deducted from income – will be expenses directly related to the transaction of acquiring shares (shares) in this company for:
- legal services relating to the acquisition of shares and stocks and their valuation (therefore, in particular, the costs of due diligence);
- notary, court and tax fees;
- Polish and foreign taxes and other public law liabilities
– excluding the price and costs of debt financing.
The deduction is made in the year of purchasing the shares (shares) and – what is important – the costs actually incurred are included in the tax relief.
If the shares are sold or redeemed within 36 months from the date of purchase, the relief is returned (by increasing the income).
IPO relief
Within the scope of this relief, the following will be deductible from income:
- 150% of expenses for the preparation of the prospectus, notary, court, fiscal and stock exchange fees as well as the preparation and publication of notices required by law;
- 50% of net expenses on legal advisory services, including tax and financial advisory services, but not more than PLN 50,000
– incurred directly for the initial public offering of shares, with the intention of applying for admission to trading on a regulated market or with the intention of applying for admission of these shares to trading in an alternative trading system.
The deduction is made for the year of the share debut on the market, and the relief applies to the costs incurred from the year preceding the share debut until the date of their initial public offering.
