On 26 June 2014, the Sejm passed the Act on
Amending Act on Corporate Income Tax, Act on
Personal Income Tax, and Certain Other Acts. The
underlying assumption for the amendment is to
counteract the harmful competition of some
countries, primarily those referred to as tax havens,
and counter deferment or avoidance of tax achieved
by moving income to subsidiaries organized in
countries with preferential tax systems. The above objective is to be achieved inter alia by taxing
income of controlled foreign companies.
When the new regime becomes effective, a domestic
resident (individual or company-payer of corporate
income tax) will be required to include in its taxable
basis the income of controlled foreign entities having
their registered office or central administration in a
country with a materially lower rate of taxation than
that effective in the country of residence of its parent
company. The act provides that materially lower rate
of taxation (znacząco niższe opodatkowanie) occurs
when the statutory income tax rate (nominal) is
lower by at least 25% than the domestic rate or when
the foreign income generated is exempt or excluded
from income tax in the source country. Within the
meaning of the amendment, an entity is deemed
controlled if it holds on a continuous basis over a
period of at least 30 days, directly or indirectly, at
least 25% of shares in share capital or 25% of the
voting rights on supervisory bodies, or 25% of shares
with which the right to participate in the foreign
company’s profits is associated. The amended
provisions will apply if the passive revenues, i.e.
received from dividends and other proceeds from
participation in profits of legal persons, from sale of
shares, receivables, interest and proceeds from loans,
sureties, and guarantees of all types, as well as
copyrights, industrial property rights, including on
account of transfer of such rights and transfer and
exercise of rights arising under financial instruments,
account for at least one half of all the revenues of the
foreign company during its tax year.
The new act also provides for exclusion of the right
to a tax exemption if dividend and other income
(revenues) on account of participation in profits of
legal persons, deductible in the distribution
company, is distributed (the so-called participation
loan). Further the act also envisages among others
the introduction of a fiscal penal sanction in the form
of a fine for breach of the obligation to submit the
financial statements on time, as well as refining the
provisions on transfer pricing and related tax
documentation.
In addition to the introduction of a number of
provisions aimed at eliminating tax optimisation
mechanisms, the amendment also includes changes
that seek to bring the tax law closer to the realities in
which businesses operate. In that regard, the
amendment provides for arrangements that so far
have not been applied under Polish law, such as the
taxpayer’s right to elect the method of inclusion of
loan interest in revenue costs, or the deferment in
time of taxation of commercialised intellectual
property contributed in kind to a company limited by
shares. Further, the amended act refines a number of
provisions which previously aroused construction
concerns, as well as unifying a number of concepts
and institutions used in both the CIT and PIT
legislation.
MILLER, CANFIELD,
W. BABICKI, A. CHEŁCHOWSKI I WSPÓLNICY SP.K.
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81-366 Gdynia
Tel. +48 58 782-0050
Fax +48 58 782-0060
gdynia@pl.millercanfield.com
ul. Nowogrodzka 11
00-513 Warszawa
Tel. +48 22 447-4300
Fax +48 22 447-4301
warszawa@pl.millercanfield.com
ul. Skarbowców 23a
53-125 Wrocław
Tel. +48 71 780-3100
Fax +48 71 780-3101
wroclaw@pl.millercanfield.com
Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield. It is intended to provide only a summary
of certain recent legal developments of selected areas of law. For this reason the information contained in this publication should not form the
basis of any decision as to a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in
individual cases. The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant
legislation or other legal development to the particular facts can be verified.