Tax & Legal Highlights for Real Estate – March 2019

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New CIT-8 tax returns for the 2018 settlements

Corporate income tax taxpayers may expect publishing of a new CIT-8 tax return template for 2018 settlements. The amendment has not been published yet, however it does not have to be bad news for taxpayers. The taxpayers who – by the date of publication of the new form – will effectively submit CIT-8 tax return on the current form (26), will not be obliged to submit the correction on the new form. The draft regulation states that it will enter into force on the day following the announcement in the Journal of Laws. Not only taxpayers and accountants, but also software providers could face additional actions, as still XML structures for the new forms were not provided. New CIT-8 returns will among others eliminate the problem of settlements of commercial real estate tax (minCIT).

Entering the buyer into the lease agreements does not result itself in treatment of the transaction as organised part of the enterprise deal

The Supreme Administrative Court in the judgment of January 28, 2019 (reference number I FSK 293/17) indicated that the fact of entering the existing lease agreements by the buyer does not result itself in treatment of the real estate transaction as an organized part of the enterprise (OPE) deal. To conduct business in the area of rental of premises, it is necessary to manage and service the real estate in which premises are located (protection, cleaning, repairs, maintenance) as well as to manage these agreements. The fact that the object’s budget has no basis in the Accounting Act and it is not prepared as part of the company’s financial reporting, leads to the fact that the property is not financially separated. In view of the above, the assets being subject to a sale could not function at the moment of the transaction as organized part of the enterprise.

Additional obligations based on MDR provisions

The new regulations on MDR also introduce the obligation to implement internal procedure to prevent not fulfilling the obligation of providing information on tax scheme. It applies to promoters, entities employing promoters or actually paying them remuneration, whose revenues or costs exceeded PLN 8 million in the previous financial year. However, according to the Ministry of Finance’s Explanations, the entities which employ an in-house, but use the schemes provided by them only for their own purposes, are excluded from this obligation. Nevertheless, when in-house will forward scheme – the employing entity will fulfil the conditions to be considered as a promoter. For failure to implement the above mentioned procedure a financial sanction amount up to PLN 2 million, which in special cases may amount to PLN 10 million.

When the sale of shares is not auxiliary activity

 In an individual tax ruling of January 23, 2019 the Head of the National Revenue Information (sign. 0114-KDIP1-1.4012.688.2018.2.RR) stated that if the shareholder participates in the management of the company in which he holds the shares and when such ownership of shares is direct, permanent and necessary extension of economic activity, the sale of shares transactions will constitute business activity in the meaning of the VAT Act. However, such transactions are subject to VAT exemption, but the remuneration received from the transactions should not be excluded from the calculation of turnover which is the basis for calculating the VAT proportion. In the analysed case, these activities do not have auxiliary character, because they are intentional, purposeful and not one-off activities (repeatable activities).

There will be the white list of taxpayers

On September this year, the government is going to publish the white list of VAT taxpayers. In the list, it will be included significant information on the contractors, i.e. taxpayer identification number, the National Court Register number, date of registration, also you can check the status of the contractor from the last 5 years. The most important information will be the bank account number for the business activity purposes. From January 1, 2020 it is planned to introduce restrictions for payments made on the bank account number, which is not included in the white list of taxpayers. It will apply to the transfers which will exceed PLN 15 000. In such case taxpayer will be sanctioned as follows: a ban on including such expense as the tax deductible cost and it will result in VAT joint and several responsibility. There will be some exception for compensation, set-off, credit and debit cards. In the case of incorrect information in the white list, the taxpayers will not bear negative consequences for the transfer on the provided bank account. The white list will be available on the website of the Ministry of Finance and CEIDG register.

The purchase of receivables is VAT taxed

According to the individual tax ruling issued by the Head of the National Revenue Information of 23 January 2019 (reference number 0112-KDIL1-3.4012.741.2018.1.PR) the purchase of receivables is taxed with VAT and is not subject of any exemption from VAT. The subject of the issued ruling is the background in which a company planned to sell its own receivables at a price equal to the nominal value after the discount, which is the remuneration. The authority stated that the transaction will be VAT taxed, as the service recipient will exist, a fee has been established, the activity is performed within the business activity and it exists a legal relationship. The transaction will not be exempt from VAT, as the purchase of receivables cannot be treated as granting of credits, loans or a cash deposit services – as the Company claims in the application for the tax ruling.

The withholding tax exemption prerequisites and definition of the “beneficial owner” should be interpret in accordance with provisions on tax evasion principles of the European Union – ground-breaking judgement of CJEU

As it results from judgements of Court of Justice of the European Union of February 26, 2019 (cases C‑115/16, C‑118/16, C‑119/16, and C‑299/16) application of the tax evasion principles (anti-abusive clause) shall not require to meet formal prerequisites provided in the national law. The cases concerned a Danish Companies which were denied to benefit from WHT exemption for interest payments due to the fact that Danish tax authorities treat the transactions made by the companies as artificial. According to the findings of the Danish tax authorities, the companies paid put interest to a lender from UE who subsequently transferred the money to foreign companies (i.e. non UE) being a part of the capital group. In the view of the Danish Government, the reasons for creation of such complicated financial structure were not purely economic. In such a case, according to the tax authorities, it could not be assumed that the recipient of interest was a beneficial owner. Therefore, there was no reason for application of WHT exemption of interest on the basis of Directive 2003/49. The CJEU stated that in any event of fraud or abuse, the Member State should on the basis of the general EU rules refuse the benefit from the EU law. Importantly, it is not required that there is a legal basis in the national law. The abovementioned CJEU standpoint is also important for the Polish taxpayers who are the parties to the proceedings carried out on the basis of provisions which were in force before introducing the definition of the beneficial owner in the Polish CIT Act (before January 1, 2017). Judgements of the CJEU confirm the possibility of questioning payments made to companies which could be treated as intermediary.

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