Important tax changes that will impact Polish companies in 2017 | eBook

Liquidation of quarterly settlements in VAT

Starting January 1st, 2017, only so called small taxpayers and taxpayers commencing their activity as active VAT taxpayers in their first 12 months of activity will be entitled to report and settle VAT on quarterly basis.

VAT returns filed electronically

Starting January 1st, 2017, obligation to file VAT returns electronically will cover the following taxpayers:

• registered as VAT EU taxpayers,
• delivering goods or providing services where the purchaser is recognized as a taxpayer (under reverse-charge),
• obliged to file returns, information and annual calculation for income tax purposes electronically.

EC-sales lists

Starting January 1st, 2017, all taxpayers will be obliged to file EC-sales lists electronically on monthly basis (quarterly EC-sales lists will be liquidated).

Introduction of VAT penalties

Additional penalties will be introduced for reporting incorrect VAT amounts. In case the incorrect submission will result in one of the following:

• understated VAT obligation, or
• overstated input VAT subject to refund, or
• overstated VAT to be transferred to next reporting period, or
• did not file the required VAT return and did not pay the VAT due to the tax office

The tax authorities will calculate the correct VAT amount and impose an additional VAT sanction corresponding to 30% of the understated tax obligation/overstated input VAT to be refunded. If after or during the tax control the taxpayer files the correcting VAT return/the missing VAT return and pays the VAT due, then the sanction will be reduced to 20%.

This sanction will not apply if the correcting/missing VAT return was filed and tax was paid before the tax proceedings were launched.

Where the under reported output VAT or overstated input VAT result from the taxpayer’s involvement in tax frauds (fictional transactions, empty invoices, etc.) the sanction rate will be 100%.

Introduction of 15% corporate income tax rate

Starting January 1st 2017, a 15% CIT rate will apply to:

• „small entrepreneurs“ (whose value of sales revenue, including VAT, had not exceeded the equivalent of EUR 1.2 million in the previous tax year);
• taxpayers starting economic activity, during their first tax year.

New limit for cash payments

The limit for payments between companies (entrepreneurs) allowed in cash will be reduced from EUR 15,000 to PLN 15,000. However, this new limit applies to the transaction value irrespective of the single payment amount. Thus in practice, in case the transaction value exceeds PLN 15,000 each payment should be made through a bank account even if a single payment is less than PLN 15,000. Cash settlements beyond this limit will be excluded from tax deductible costs.

Standard Audit File for Tax (JPK)

Starting January 1st, 2017 the obligation to submit monthly JPK_VAT file (the Standard Audit File covering purchase and sale register for VAT) covers small and medium entrepreneurs.

An entrepreneur shall be recognized as medium-sized in the case where at least in one of the last two financial years:
1. employed less than 250 employees (average per year) and

2. achieved the annual net turnover from sale of goods, products, services and financial operations that did not exceed the PLN equivalent of EUR 50 million, or where the total value of assets in its balance sheet prepared at the end of one of these years have not exceeded the PLN equivalent of EUR 43 million.

An entrepreneur shall be recognized as small-sized where at least in one of the last two financial years:

1. employed less than 50 employees (average per year) and

2. achieved an annual net turnover from sale of goods, products, services and financial operations that did not exceed the PLN equivalent of EUR 10 million, or the total value of assets in its balance sheet prepared at the end of one of these years have not exceeded the PLN equivalent of EUR 10 million.

On January 1st, 2017 new regulations concerning transfer pricing documentation will come into force. The most relevant changes concerns:

Increase of capital relations threshold

Current capital relation threshold will be increased from 5% to 25%. In consequence, transactions between entities having less than 25% of direct or indirect shares will not be covered by documentation obligation.

New quantitative thresholds

Obligation to prepare the documentation will cover taxpayers whose income or expenses exceeded the equivalent of EUR 2 million in proceeding year. Beyond this level, the taxpayer will be required to prepare the documentation for all transactions having significant impact on income or loss.

Pursuant to the new regulations, transactions having significant effect on the amount of income or loss shall cover transactions which total value exceeds the equivalent of at least EUR 50,000. Moreover, the new regulations determinate the range to which the materially threshold will increase as the income of the entity increases.
For taxpayers whose revenues amount to over EUR 2 million, but less than EUR 20 million threshold -has been set at EUR 50,000, increased by EUR 5,000 per each 1 million of revenue above EUR 2 million.

For taxpayers whose revenues amount to over EUR 20 million, but less than EUR 100 million -threshold has been set at EUR 140, increased by EUR 45,000 per each 10 million of revenue above EUR 20 million.

The taxpayers whose revenues amount to over EUR 100 million will be obliged to document transaction which value will exceed EUR 500,000.

It should be emphasized that current threshold of EUR 50,000 applicable to documentation obligation for partnership agreements, join venture agreements and agreements of similar nature will remain unchanged.

Introduction of new elements to the transfer pricing documentation

A. Local file (the basic version of documentation) will include additionally:

• a description of the organizational structure and management structure of the taxpayer,
• a description of implemented economic strategy,
• a description of the competitive environment,
• a description of restructured activities,
• documents related to the transaction,
• financial data,
• justification for the selection for calculation of taxpayers income (loss).

B. Master file – the new component of transfer pricing documentation, that include: information concerning group of related entities, the description of organizational structure of the group, applicable rules for determining transaction prices, subject and scope of groups activity, financial situation of the group and description of significant intangible assets held by the group.

C. Country-by-country reporting – also the new component of transfer pricing documentation. The report will contain statements of income, amount of paid tax and places of economic activity of subsidiaries and foreign establishments belonging to the capital group in given tax year.

Considering the above it should be emphasized that:

• taxpayers with income or expenses from EUR 2 million to EUR 10 million, will only have to draw up local file.
• taxpayers with income or expenses that exceed EUR 10 million will be additionally obliged to draw up benchmarking study.
• taxpayers with income or expenses that exceed EUR 20 million will be additionally obliged to draw up the master file.
• taxpayers with consolidated revenues that exceed EUR 750 million will be required to prepare (in addition to the local file and the master file) group report (country-by-country reporting).

It is expected to prepare the transfer pricing documentation not later than on the date of submission of the tax return for given tax year. The documentation shall be reviewed and updated no less frequently than once a year. As before, the taxpayers will be required to submit complete documentation within 7 days after the request made by the tax authority.