Capital income and its separation from other income of the taxpayer
From the 1st January, 2018 within the ‘Corporate Income Tax Act’, taxpayers will be obliged to detach the operating income from the capital income. Subsequently, loss from one source will not decrease income from the other source.
The provision determined above will be appropriate for:
- Actions conducted by companies being members of tax capital groups; and
- Taxpayers obtaining revenues of the held share in a company not being a legal person, joint venture, joint possession or joint use of objects and property rights.
Possible restrictions for the possibility to classify expenditures on debt financing and intangible services to tax-deductible costs
The list of potential costs of debt financing covered by the new limit has been increased by legislators. Therefore, the option to classify the interest on financing to the tax costs in its full amount has been restricted when the surplus of the costs of debt financing surpasses the amount of PLN 3,000,000.00 in the given year in the company of the given taxpayer. It is related to the debt financing attained both from affiliated entities and from non-affiliated entities. The excess of the costs of debt financing exceeding the amount determined above may be classified to tax costs, up to 30% of the amount corresponding to the excess of the total revenues from all revenue sources reduced by interest revenues over the total tax-deductible costs reduced by the value of the amortisation write-offs classified to tax-deductible costs in the given tax year and costs of debt financing.
Furthermore, it will not be likely to classify expenditures resulting from intangible services (e.g. advisory, accounting, advertising services), as well as any fees and due amounts for the use or right to use the rights or intangible assets (e.g. licenses) that in total surpass the amount of PLN 3,000,000.00 in the tax year to tax-deductible costs. The taxpayer will be able to classify the overheads determined above, to costs up to 5% of the amount equivalent to the surplus of the total revenues from all revenue sources reduced by interest revenues over the total tax-deductible costs reduced by the value of the amortisation write-offs classified to tax-deductible costs in the given tax year and interest.
Alterations concerning foreign controlled corporations
The lawmaker has altered the principles qualifying the entities as foreign controlled corporations:
- the classification of a foreign corporation has been altered through adding that the resident holds shares in the capital of a company not having its registered office/management board on the territory of the Republic of Poland, directly or indirectly, independently or together with affiliated entities;
- the maximum shares allowed to be held by the taxpayer has been increased from 25% to 50%, while this limit will be fulfilled when the resident exceeds the threshold of holding of 50% of shares in the foreign corporation independently or together with affiliated entities; and
- the percentage share of passive revenues obtained by the foreign corporation has been reduced from 50% to 33% and the passive revenue catalogue has been expanded.
Furthermore, the lawmaker has obliged the taxpayers to keep a ‘Controlled Foreign Corporation Register’. After the end of the tax year, the taxpayers are obliged to record the events occurring in the foreign controlled corporation in a separate record.
Amendment of provisions – the Tax Capital Group
The most significant changes relating to the functioning of the Tax Capital Group are highlighted below:
- reduction of the typical amount of share capital that must be controlled by the companies creating the Tax Capital Group from PLN 1,000,000.00 to PLN 500,000.00;
- reduction of the level of profitability of the Tax Capital Group from 3% to 2%;
- reduction of the direct share that must be held by the parent company in the capital of the subsidiaries from 95% to 75%;
- restricting the time limit for notification of the agreement on establishment of the Tax Capital Group to the competent body from 3 months to 45 days, before the start of the tax year adopted by the Tax Capital Group;
- introduction of a solution, according to which – in case when the Tax Capital Group violates the terms & conditions for its functioning (apart from the condition concerning to the profitability) – the companies creating previously the Tax Capital Group will have to settle the tax within maximum 3 years, as if the Tax Capital Group was not existing in this period (i.e. through settlement of CIT by each of the companies separately); and
- need to apply market terms & conditions in the transactions between the members of the Tax Capital Group.
Taxation on capital contributions made to limited companies
The new provisions adopt taxation on any contributions to limited companies – not the non-cash ones (i.e. for example in the form of real estates, machines and devices, stocks and shares), but also the cash ones.
The alteration relates to Art. 12, Section 1, Point 7 of the CIT Act. At present, it results therefrom that a non-cash contribution made to a company or to a co-operative in another form than an enterprise or it’s organise part is a revenue. After the alteration, ‘the value of the contribution determined in the statute or in the articles of association of the company and in case of their lack, the value of the contribution determined in another document of similar character’ will become a revenue.
The most significant changes to VAT in 2018
Standard Audit File for Tax
getsix® would like to prompt you that as of 2018, an additional group of entrepreneurs (micro-entrepreneurs) will be covered with the responsibility to provide the data within the Standard Audit File for Tax. This means that in 2018 all companies will deliver information to the officials within the Standard Audit File for Tax. It relates to the record of VAT purchases and sales (SAF-T_VAT), which the taxpayers will have to deliver to the Tax Office every month.
VAT Split Payment Audit
Within the tightening of the tax system in Poland, the lawmaker has designed the act changing the mechanism of VAT settlements applied previously by the entrepreneurs. The authors of the bill observed a serious gap in the preceding system enabling the use of VAT for tax abuses. The earlier mechanism was specifying that the taxpayer being the supplier calculated the tax by themselves and paid the tax obligation to the account of the Tax Office from its own current means. The anticipated changes are to limit the possibility to administer extra money on account of VAT due amount and create the mechanism of its split payment.
The tax payment will be now made in two amounts, individually to two accounts:
- an account selected for the net due amount; and
- an account allocated to the tax amount – restricted access to the means deposited thereon.
The payment of the due amounts to both accounts will be possible by means of one transfer, in which we will be defining the net value and VAT to be paid. The split payment mechanism will function solitary between VAT payers, so it will not apply to a payment for a service or a delivery of goods performed by a VAT payer to the advantage of a natural person. Furthermore, it is worth stating that the split payment may be applied solely by means of transfers. The use of the split payment tool is voluntary and the incentive system presented below is to encourage to its use.
- VAT return fast-tracked to 25 days;
- assistance from joint and several liability; and
- lack of application of increased interest on VAT arrears.
The alterations described above are on the stage of being processed in the Senate. According to the bill, the changes are to enter into force as of 1st April, 2018.
PIT changes in 2018
Applying the 50% rate of tax-deductible costs has new limitations
The lawmaker has made a change in the form of tightening the group of entities that will be eligible to apply the increased tax-deductible costs on account of performance of creative work. The scope of the revenue list, which will come into force as of the 1st January, 2018, is as follows:
- Income from research and development work, as well as scientific and didactic work;
- Creative work in the field of architecture, interior architecture, landscape architecture, city planning, belles-lettres, visual arts, music, photography, audio-visual works, computer programs, choreography, artistic violin-making, folklore arts and journalism;
- Income from artistic work in the field of acting and stage performance, theatre and performance directing, dancing and circus arts, conducting, vocal arts, instrumental arts, costume design and scenography;
- Income from publicity work; and
- In the field of audio-visual production of directors, screenwriters, photography and sound directors, editors and stuntmen.
Furthermore, the new provisions increase the annual limits related to the use of the 50% rate of TDC by 100%, i.e. to the amount of PLN 85,528.00. (Currently: PLN 42,762.00). Any type of creative work, which is not incorporated in the list, will not offer the option of recognising 50% of TDC from revenues obtained from the transfer of copyrights.
Changes within the field of the tax exempt amount
From the beginning of 2018, the tax exempt amount will increase from PLN 6,600.00 to PLN 8,000.00. At the same time, the tax exempt amount will be still decreasing along with the increase of the revenues constituting the tax base, which exceed the amount of PLN 8,000.00, but do not exceed the amount of PLN 13,000.00. Persons earning over PLN 13,000.00, but less than PLN 85,528.00 may use the exempt amount of PLN 3,091.00 (in practice, it means decrease of tax by PLN 556.02). On the other hand, the exempt amount will be also decreasing for the taxpayers with revenues exceeding the amount of PLN 85,528.00 and in case of revenues exceeding the amount of PLN 127,000.00, it will amount to zero.
From the beginning of 2018, the lawmaker announced provisions that eliminate the revenues obtained from the motivational schemes from the source of the monetary capitals (19% tax rate). Thus, such revenues will be included in revenues from employment relationship or from activity conducted personally. Revenues from motivational schemes will be taxed according to the tax scale (18% and 32%). Also the tax point of the revenues from sale of the stocks acquired within the motivational schemes has been regulated. The taxable revenue will occur at the moment of sale of these stocks.
A summary of incentives for investors
Relief in 2018 for ‘Research & Development’
The bill on alteration of some acts for the purposes of improvement of the legal environment of innovative activity, signed by the President on the 24th November 2017, allows the entrepreneurs running innovative activity in the basic scope or after obtaining of the status of a research centre for deduction of tax-deductible costs incurred on the research & development activity, referred to as ‘eligible costs’, from the tax calculation base. The currently existing relatively low rate of deduction of eligible R&D costs, amounting to 50% and 30% (depending of the type and size of the enterprise), was only a preview of the benefits that we will be able to achieve in 2018. Due to the new act, the rates of deductions of all R&D eligible costs from the taxation base are to increase up to 100% and in case of the entrepreneurs having the status of a research centre – to 150%.
The Polish Investment Zone – announcement of a bill
This bill is only in the phase of social consultations which may affect the time of its execution. The declared bill will provide the investors with a ground-breaking investment tool in the form of the planned ‘Polish Investment Zone’. The prepared provisions mean expansion of the area of the ‘Special Economic Zones’ (SEZs) from 14 locations up to 312,000 km2 – i.e. the area covering the entire territory of the country, without any exceptions. Separately from the above-mentioned changes relating to the growth of the area, on which tax preferences will apply, also the term of applicable support of the programme for the investors will change. In comparison with other countries, the SEZ instrument is less attractive, taking into account its validity period (9 years of exemption from income tax in Poland). The lawmaker intends to present a solution determining the term of the support, not being shorter than 10 years and not being longer than 15 years, and moreover, in case of entities operating on the area of the current SEZ, the decision on support of the new investment is issued for the period of 15 years.
Furthermore, specialised management companies will be established, which thanks to their understanding will be able to assist in making of decisions in an effective manner. At the same time, these companies will perform the role of the main contact in the given region – the individual districts will be served by the designated management companies. Amalgamation of the scope of responsibility and service will simplify the operation of the investors and will allow for shortening of the time of waiting for the administrative decision. The bill will also develop new criteria for obtaining of the support determined above. Tax preferences will depend on three basic and at the same time clear and legible issues.