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Most of the changes are intended to discourage taxpayers from transactions aiming at or leading to, achievement of tax advantages (e.g. general anti-abuse clause) and therefore, to prevent a tax leakage, especially in the field of CIT and VAT. Some of the changes reflect provisions elaborated by the OECD/EU, which still must be introduced to the Polish tax regime (e.g. anti-abuse clause with respect to dividends).
In regards to upcoming amendments proposed by the new government (i.e. introduction of a tax for financial institutions and a turnover tax for stores), it is difficult to estimate their scale and accurate consequences. However, we assume that they will have significant implications not only for Polish companies, but also for foreign entities conducting business in Poland.
Since 1 January 2016, the following provisions have entered into force:
1) Anti-abuse clause with respect to dividends
The anti-abuse clause with respect to tax exemption for dividend and dividend-like income distributions has been introduced to the Polish CIT Act (following the changes in the Parent-Subsidiary Directive which focuses on preventing the creation of artificial structures). Under the new provision, the CIT exemption will not be applicable if the dividends (dividend-like income) are paid out in relation to artificial transactions and their sole purpose was to obtain tax exemption.
2) In dubio pro tributario principle
A principle, according to which doubts in the body of tax law shall be settled in favour of a taxpayer, has been introduced to the Polish Tax Ordinance. According to the wording of this rule, it does not apply to doubts as to the facts which often arise during tax proceedings. In our view, the above clause may be disregarded by tax authorities as they tend to claim that the tax rules are precise and there are no doubts concerning their interpretation.
The other changes which have been announced (they may be expected in 2016 – 2017) include:
1) General anti-abuse clause
The general anti-abuse clause was planned by the previous government and is expected to be enacted despite the change in Parliament. The latest version of the clause published on the governmental website is as follows: The action aimed first of all at achievement of tax advantage, contrary to the particular circumstances to the object and purpose of a tax law, shall not result in the achievement of a tax benefit, if the mode of action was artificial (tax avoidance).The anti-abuse clause may enter into force still in 2016.
2) Introduction of tax for financial institutions
The works in Parliament are advanced – it is probable that the new tax will be in force as of February, 2016. The tax rate will be 0.44% per annum (an institutions’ own funds and Treasury bonds will be excluded from the tax base). As for now, the new tax should not impact close-end investment funds. However, other types of taxation (e.g. tax on financial assets or financial transactions) may still be independently introduced.
3) Introduction of turnover tax for shops
Initially it was planned that the tax will be paid by stores meeting the following criteria: sales area greater than 250 m2 and a turnover exceeding PLN 2 M in a quarter. According to the newest information, the government tends to give up the surface criterion. This means that the tax may affect more subjects than originally expected. It has not been resolved yet whether the new tax will apply only to “real” stores or e-commerce. The turnover will be taxed at 2% tax rate (progressive rate is also under consideration). In the budget for 2016, the Parliament estimated the proceeds from the new tax at PLN 2 billion. Therefore, it is a foregone conclusion that the tax will come into force soon.
4) Introduction of new VAT Act
Under the new VAT Act which was announced in October, 2015, a split payment mechanism was introduced (taxpayers will make payments for invoices exclusive of VAT, as VAT will be paid directly to a separate bank account of a supplier, managed in fact by the tax authority). VAT quarter settlements will be repealed. The initial proposal included a number of controversial provisions, such as the taxation of tax benefits (“tax benefits” have not been defined in the act). The works on the new VAT Act are still in progress. It is claimed that its introduction should bring significant budget revenues (even PLN 19 billion of additional revenue in the first year).
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In our view, the new regulations (including those for which final wording is still being discussed) might be quite challenging for taxpayers. It is time to start preparing for the upcoming changes.
What seems particularly important are transactions that may be potentially perceived as leading to tax abuse, as the term ”tax advantage” may be broadly interpreted by tax authorities. In particular, keep in mind the anti-abuse clause with respect to dividends (which has been already introduced). Any distribution of profits should be subject to closer analysis if preceded with restructuring (since the tax exemption may be no longer applicable).
In case of any doubts or questions regarding the described changes, please do not hesitate to contact Crido Taxand Team in Poland.