The submission of APA application by December 31, 2019 will exclude the restrictions from art. 15e of the CIT Act regarding acquired intangible services and licenses for 2018 and 2019.
Exclusion of restriction according to art.15e o the CIT Act
The exclusion is a direct result of the bill on the settlement of disputes regarding double taxation and the conclusion of advance price agreements (APA), which have been adopted by the government and submitted to the Polish Parliament on August 23, 2019.
Applicable legal status
In accordance with the applicable legal status, taxpayers shall be obliged to exclude from the tax deductible costs the expenses on intangible services, such as e.g. consulting, management, certain categories of licenses incurred for the benefit of the related subjects. These limits have been in force since 2018 and result from art. 15e of the CIT Act.
The only way for Polish companies to avoid these restrictions is to obtain an APA decision, which confirms the correctness of calculation of the remuneration for those services between related parties. The APA decision would simply allow you to fully deduct the costs listed above (Article 15e of paragraph 15 of the CIT Act).
Changes concerning current legislation
The new draft law provides a definite change in the existing rules:
- possibility of excluding from art. 15e of the CIT Act will only take place in case an advance price agreement (APA) or tax agreement has been concluded;
- extension of time period secured by APA – since the beginning of the year in which the application was submitted – currently it is only from the date of submission of the application;
- the moment of submitting the application by 31 December 2019 will be significant, because only such applications will be subject to the transitional provisions, which indicate that the exclusion of costs reduction from art. 15e of the CIT Act will also apply to the tax year preceding the tax year of submitting the application (currently it is the tax year in which the decision was issued).
The described changes are still to be adopted by the government, submitted to the Polish Parliament, but the content of the provisions justifies to take action to submit the APA application before the end of 2019. Such action will allow the taxpayers to take advantage of the exclusion indicated.
Should you have any questions or doubts, Accace tax team will be happy to help.