Expected changes to the CIT act reform
On September 5, 2017, the Government Legislation Centre published the Minister of Finance and Development’s response to the concerns raised regarding the bill amending the income tax act (the so-called major CIT reform). According to this document, the bill will go through further modifications. The main ones have been presented below.
Tax Capital Groups (TCG)
- shortening up to a maximum of 3 years the period in which companies previously forming TCG will have to individually settle CIT retroactively. In the case of tax capital groups operating (until the conditions of maintaining TCG status are breached) shorter than 3 years, this period will be adjusted accordingly and will coincide with the period of existence of such a group.
- settling tax retroactively in such situations will not cover the period preceding January 1, 2018, i.e. the planned effective date of the reform.
Commercial property tax
- the rate will be decreased to 0.035% monthly. Moreover, this taxation will apply solely to values over PLN 10 million of the buildings mentioned in the proposed provisions.
- office buildings used for the taxpayer’s own needs (e.g. headquarters), i.e. cases, which in fact are not related to obtaining revenues by the taxpayer, will be excluded from the bill.
CFC
the bill will be supplemented with the indication of criteria, which must be taken into consideration when evaluating „significance” of the activity conducted by a controlled foreign corporation in the EU member state (EEA) by implementing to the provision of art. 24a of CIT (art. 30f PIT) the following clause).: „X. The condition of conducting a vital real business activity by the controlled foreign corporation is evaluated by the activity carried out by this company. When evaluating whether the real business activity is of essential character, the ratio of revenues obtained by the controlled foreign corporation from the conducted real business activity to its income in general should be particularly considered”.
Costs of intangible services
- excluding from the scope of the imposed limits the following: costs of services (including data processing services), fees, and licenses borne for the benefit of unrelated parties as defined in the income tax provisions,
- increasing the threshold to PLN 3 million up to which the costs of intangible services stipulated in the proposed provisions as well as the above-mentioned costs of fees and licenses may be recognized as tax-deductible costs in whole without relating their amount to EBIDTA ,
- enabling taxpayers to carry forward (up to 5 tax years) the cost amount regarding the above-mentioned services, fees, and licenses, which cost amount exceedsthe threshold in a particular year
- excluding the limitation mentioned in art. 15e clause 1 from costs realted to the above-mentioned services, fees, and licenses, which costs were borne within a tax capital group (by a TCG member company for the benefit of another member company within the TCG),
- exclusion of certain intangible services from the catalogue subject to the proposed provisions , i.e.: accounting services, legal services, and services regarding recruitment and staff sourcing.
Free-of-Charge transfers
- this regulation would impose the burden of declaring revenues from free-of-charge real estate transfers by obliged entities to the State Treasury, local government, or state (national) organizational units under the following provisions:
- the act of July 20, 2017 on the National Real Estate Reserves (Journal of Laws of 2017, Item 1529),
- the act of September 5, 2008 on commercialisation of the public utility „Poczta Polska” (Journal of Laws of 2008, Item 1109, as amended),
- the act of September 8, 2000 on commercialisation and restructuring of the state enterprise Polskie Koleje Państwowe (Journal of Laws of 2017, Item 680 and 1529).
- art. 14 clause 1 of the CIT will be amended so that Free-of-chargefree-of-charge transfers of goods, rights, or services will include only those enumerated sitations with which tax optimization schemes are often related as described in the justification to the proposed provisions. In consequence, the term “upon payment” will be restored to the wording of clause 1 regarding the transfer of tangible property or property rights.
- the provision of art. 14 will be supplemented by additional guidelines with the following: „6. The provisions of clause 1-3 shall also apply to Free-of-chargefree-of-charge transfers of tangible property or property rights, as set forth in art. 12 clause 1 point 7, for the benefit of an entity in which a taxpayer, together with related parties, as defined in art. 11, holds at least 95% shares , with the exception of a Free-of-chargefree-of-charge transfer of tangible property or property rights to an organization as set forth in art. 3 clause 2 and 3 of the Act of April 24, 2003 on activities for the public benefit and volunteer organizations, or similar organizations, as defined by regulations governing public benefit activities in another EU member state or in a state within the European Economic Area, which similar organizations conduct activities for the benefit of the public with the purpose of satisfying the goals as stipulated in art. 4 of this act,
Transitional provisions
A solution will be accepted according to which, in the case of an existing TCG, thecompany currently representing the group will continue to be indicated in the agreement as the foudin company of such group.
Source: https://legislacja.rcl.gov.pl/projekt/12300402/katalog/12445378#12445378
