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2021 brings a number of changes in tax and legal regulations. Apart from the widely discussed changes in the field of VAT reporting, no less significant changes concern income taxation, which will essentially affect the profitability of entrepreneurs and investors operating in Poland. In addition to crucial changes to the concept of certain legal forms taxation, a number of amendments were introduced to clarify the existing provisions. New regulations also show positive changes for taxpayers, such as an increase in the limit allowing the application of a reduced tax rate or extending the deadlines for applying the exemption from tax on income from buildings.
In case of doubts or questions, our experts will be happy to explain the intricacies of the new regulations.
The amendment introduces treatment of limited partnership having their registered office or management in the territory of Poland as a corporate income tax taxpayer. With respect to general partnerships, CIT taxation will be imposed in the case when at least one partner is not natural person or all partners having profit share are not disclosed to the tax authorities.
Limited partnership is so-called tax transparent company. This means that income is taxed only at the level of the partners and not the company itself. In other words, limited partnership is not a taxpayer, income is attributed proportionally to the partners and they are liable to pay the income tax.
Recognition of a limited partnership as a CIT taxpayer will significantly reduce the attractiveness of this legal form, what is more, this procedure is in a certain extend contradiction to its very concept, which should combine the features of a partnership and a capital company. The introduced change will undoubtedly constitute an impulse for a number of capital restructuring and relocation of investments.
The regulations provide for mechanisms which, according to the explanatory memorandum to the draft act, were to eliminate the negative effects of double taxation. In this respect, limited partners are treated differently than general partners.
The exemption will apply to amounts corresponding to 50% of the revenues obtained by the limited partner from the share in the profits of the limited partnership, but not more than PLN 60,000. The limit is to be calculated separately for each limited partnership in which the taxpayer is a limited partner.
This exemption is not applicable to limited partner which:
The issue of general partner’s taxation is regulated separately. Pursuant to the new regulations, it will be possible to deduct the amount of tax paid by this partnership from the income tax calculated on the income from the share in the limited partnership’s profits. Deduction shall be done proportionally encumbering the general partner’s profit obtained from the participation in such a partnership. This means that in practice the general partner will receive a tax credit corresponding to the amount of tax paid by the partnership on the profits to which he is entitled. As a rule, this mechanism will eliminate double taxation, but only in an ideal situation when both the limited partnership and its partner show no tax loss.
It should be emphasized that taxpayers can decide on their own whether the new taxation rules will apply from January 1st, or from May 1st, 2021. The choice of a later date means that the financial year lasting in 2020 will be extended until the end of April 2021.
The amendment introduces the definition of a Real Estate Company. It is an entity other than a natural person, obliged to prepare a financial statement based on the provisions on accounting, in which:
From January 1st, 2021, the taxation will change in the event of the sale of shares or stocks in this type of companies, if one of the parties to the transaction is an entity without a registered office or management board in the territory of the Republic of Poland. In such a case, the company itself will be obliged to pay 19% income tax to the tax office by the 20th day of the month following the month in which the income was generated.
If the Real Estate Company does not have information about the amount of the transaction, the tax due is determined at the level of 19% of the market value of the shares to be sold, all rights and obligations, participation title or rights of a similar nature.
In addition, certain entities will be obliged to provide the Head of the National Revenue Administration by the end of the third month after the end of the Real Estate Company’s financial (or tax) year, information:
From 1st January 2021, certain entities will be required to publish a report on the implementation of the tax strategy on their website.
The obligated entities will be:
Failure to submit the report will be subject to a fine of up to PLN 1,000,000.
The report will have to be published by the end of the twelfth month following the end of the tax year.
According to the amendment, the report will include:
The amendment provides for the extension of the catalogue of events that make it impossible to settle tax losses when taking over other entities.
As indicated in the justification, there are cases of tax optimization involving the acquisition by a loss-making entity that does not predict the possibility of producing profit in subsequent years, and thus utilizing the losses against the revenue of taken over entity. According to the Tax Authorities, some of these activities are carried out only to benefit from the tax and without any business justification.
Starting from 2021, it will not be possible to offset the losses of the acquiring entity with the income of the acquired entity, enterprise or organized part of the enterprise if:
Polish CIT Act provides for a regulation which limit possibilities of tax optimization. The mechanism refers to settling the liabilities in kind. It provides that if the liability is satisfied by non-cash benefit, when its market value exceeds the value of the liability, this market value should be subject to taxation in the hands of the debtor.
This rule should eliminate the situation when the liability, for example due to dividends, is satisfied by delivering goods with a value exceeding its nominal value, while the nominal value of the dividend is subject to taxation.
Starting from 2021 these regulations will be also applicable to the liquidation dividend settled in kind.
The act provides for the following changes to the transfer pricing regulations:
As part of the package of changes concerning transfer pricing, the provisions on transactions with tax havens are also modified. The key changes in this area concern:
According to hitherto regulations CIT taxpayers having revenues below equivalent of EUR 1,200,000 can benefit from diminished 9% CIT rate instead of 19%. Introduced regulation increase the limit of revenues to EUR 2,000,000 per annum.
Polish tax regulations impose additional income taxation to the entities deriving income from commercial buildings. The amendment provides for the extension of the deadline for using of the exemption from tax on revenues from buildings also in the event that after December 31st, 2020, the state of the Covid-19 epidemic is still in force.
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