The undistributed profits are subject to income tax (at the rate of 19%), if the non-transparent company (e.g. a limited liability company) is transformed to a partnership (which is tax transparent). As from 1.1.2015 this concerns also the profits, which have been credited to the retained earnings account.
According to the recently passed amendment to the CIT Act (which is to come into force as from 1.1.2015), the rules with regard to non-cash dividend will be changed.
As from January 2015, the non-cash dividend will be deemed to be the sales transaction (triggering the tax).
According to the recently passed amendment to the CIT Act (which is to come into force as from 1.1.2015), the rules with regard to thin capitalization will be extensively modified.
These changes would affect the limit of the interests, being treated as tax-deductible:
- The limit would concern the directly related entities, as well as those, which are indirectly related;
- The ratio would be based on the equity (excluding revaluation reserve and some other items), not only on the share capital.
- The threshold ratio value has been changed to “1: 1” (previously: “1:3”)
- The ratio should be calculated as at the end of the month preceding the month of payment. (previously: the date of interests’ payment)
The taxpayers will be given a possibility to apply the alternative method, considering all the loans/bank loans received (not just those granted by the related entities). As a result, the higher the debt is (irrespective of who provides for the financing), the less the tax-deductible expenses are .
Under the alternative method the limit would be calculated as follows:
(R + 1,25 p.p.) x A,
R – NBP (Polish Central Bank) reference rate as at the at the recent year-end;
A – The tax value (tax base) of the assets, excluding intangible assets, as at the year-end (as a general rule the tax value of the assets, e.g. the trade receivables, would be equal to their book value).
The deduction may not exceed 50% of the operating profit (except for some financial institutions).
As a general rule this scheme should be opted for no later than at the end of the first month of the tax year, at least for the next 3 years.
This method may be preferred by the companies, taking advantage of the intra-group financing, especially if the loans are granted in foreign currencies (subject to lower interest rates than these in PLN).
According to the recently passed amendment to the CIT Act (which is to come into force as from 1.1.2015), the income generated by the Controlled Foreign Corporations (CFC) is to be treated as taxable on the part of their Polish shareholders.
In general, the new regulations will affect two groups of companies:
1) Companies, which have a seat or management in a country applying harmful tax competition or in a country, that has entered no DTT (or similar) with Poland.
2) Companies that meet all of the three following conditions, concerning:
- the level of control exercised by the Polish taxpayer (at least 25% of the voting rights, participation in equity or in profits),
- sources of income (at least 50% of the revenue being passive income such as dividends, interests, or generated by alienation of shares etc.),
- the place of seat or management (in a country with a tax rate lower than the one being in force in Poland at least by 25%, which implies that the threshold rate is 14,25% ).
The new regulations obligate the Polish taxpayers to keep a register of CFCs and to record defined events, affecting their tax liabilities.
The income generated by the Controlled Foreign Corporation should be included in the tax basis for CIT/PIT purposes. However, the tax paid by the CFC abroad may be deducted from the Polish income tax (at the rate of 19%), taking into consideration a respective profit share due.
An exclusion will be provided for Controlled Foreign Corporations with annual income not exceeding Euro 250 000 and for these foreign companies which conduct actual business activity within the European Union, European Economic Area or in any other country, being a party of the respective international agreement (in the latter case additional conditions apply). The actual business activity would be existent, if, e.g., the resources (premises, staff, etc.), commensurate with the scope of activity, are available.
The new regulations will not apply to the partnerships, which are tax transparent.
The aforementioned regulation is also addressed to the taxpayers operating through a permanent establishment outside Poland.
As from 1.4.2014 the main criterium for deduction of input VAT is the extent, to which the vehicle is used for business purposes. Accordingly, also the passenger cars may entitle the VAT-payers to deduct the input VAT in full, if the mileage-log substantiates that the car has been utilized solely for business purposes and if the acuisition (leasing etc.) has been reported to tax authorities in a timely manner. Otherwise, the limit of 50% applies.
The Supreme Administrative Court has confirmed (in the resolution of 24.06.2013, I FPS 1/13), that only the municipalities can be the taxable persons. The budget entities (established by the municipalities) are not the VAT-payers.