Work is underway on new tax solutions which, in accordance with the Ministry of Finance’s plans, are to enter into force in just 3 months: as of 1 January 2021.
If you conduct an activity:
in the form of a limited partnership or general partnership
in the real property sector
in the form of a capital group
gain revenues in excess of EUR 50 million
are planning a merger of companies or their liquidation
apply transfer pricing regulations
then the planned changes may be of particular importance to you. The new regulations are to cover, amongst others
a) CIT taxation of limited partnerships having their seats or management boards in the territory of the Republic of Poland
The draft law provides for CIT taxation of limited partnerships, as well as for income tax on the partners in respect of their share in company profit. Also, general partners will be able to deduct pro rata the tax paid by the company. However, in the case of limited partners it will be possible for 50% of revenues in respect of the share in company profit to be exempt from tax (not more, however, than PLN 60,000, and also on condition that there are no ties with the general partner). In connection with above changes, limited partnerships whose tax year is different to the calendar year will have to close their books as at 31 December 2020.
b) CIT taxation of certain general partnerships having their seats or management boards in the territory of the Republic of Poland
General partnerships will be subject to CIT if the partners include entities other than natural persons, and at the same time the general partnership does not submit information to the tax authorities about who will tax the revenues from that company. The declaration should be submitted before the financial year begins and should be updated in the event of changes. In connection with above changes, general partnerships whose tax year is different to the calendar year will have to close their books as at 31 December 2020.
c) Introduction of so-called “real property companies”
The draft regulations introduce the concept of the so-called real property company, i.e. an entity other than individual person, in which on the first day of the tax year (for entities starting their activity) or on the last day of the year preceding the tax year (for other entities) at least 50% of the balance sheet value of the assets comprised of real property (or rights to real property) located in Poland. A real property company will be obliged to inform the Head of the Polish Tax Administration each year about its direct and indirect shareholders. Furthermore, a real property company not having its seat or management board in the territory of Poland will be obliged to appoint a tax representative in Poland, under pain of a fine of up to PLN 1 million. Entities from the EU or EEA would be exempt from the obligation to appoint a tax representative.
If a buyer or seller of share rights in such entity is a non-resident, then the real property company will be responsible - as the payer - for remitting the due tax on shareholders’ income to the tax office (PIT or CIT).
d) New obligation to prepare and make public the tax strategy
Tax capital groups, taxpayers with revenues in excess of EUR 50 million, as well as real property companies will be obliged to prepare and publish a report on implementation of the tax strategy, under pain of a fine of up to PLN 250,000. The tax strategy should cover information, amongst others, about the number of applications filed for an individual interpretation, or reports on tax schemes.
e) Taxation of an “in-kind dividend” paid out upon liquidation of a company
If a liability is regulated as a result of the assets of a liquidated company being shared between partners/shareholders, then revenue will arise for the company in the amount of the regulated liability.
f) Restrictions in settling losses
A restriction in settling losses will be extended to also include taxpayers acquiring other entities (in a situation involving a change of the subject of activity or changes in the shareholding structure). At present, the restriction in settling losses mainly involves situations where the loss was incurred by the acquired entity.
g) Changes regarding transfer pricing
In transactions with an entity having its place of residence, seat or management board in the territory of a so-called “tax haven”, the threshold for preparing transfer pricing documentation will be set at PLN 100,000. This will also apply to a situation where the actual beneficiary of the entity has its place of residence, seat or management board on the territory of a “tax haven”. Moreover, the local transfer pricing documentation will have to include a business justification for the transaction with an entity from a “tax haven”.
Taking into consideration the possibility of further modifications being made to the draft law, as well as the various business and legal conditions of your activity, we encourage you to contact our experts directly. They will be able to advise you on how best to prepare for the planned changes