Tax & Legal Highlights for Real Estate – June 2020

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Interest on financing the purchase of another entity’s shares should reduce both capital gains and other revenues

The Voivodship Administrative Court in Warsaw in its judgment of November 6, 2019 (reference no. III SA / Wa 271/19) took the position that interest on loans received for purchasing shares in companies should be allocated using a revenue key both to source of revenues from capital gains and other revenues. In the case at hand, at the time when holding the shares, the taxpayer has also been selling commercial services and goods to those companies as part of her business activities. The court took the position that revenue from the sale of goods and services in the course of business obtained from entities related by the taxpayer are not income from capital gains and the fact that the sale by the taxpayer is the result of its ownership of shares in companies that are the buyer of commercial goods sold by the taxpayer is irrelevant. Therefore, the court agreed with the taxpayer’s position that the costs of financing the purchase of shares may be deductible not only on capital gains, but also on operating profits.

Cross-border merger without artificial optimization features – positive opinion of the Head of National Revenue Administration

On 30 April 2020, the Head of the National Revenue Administration issued a protective opinion (no. 189578 / K) in which he confirmed that with respect to the planned merger with a foreign company, the tax benefit would not be the main or one of the main objectives, therefore, it would have economic justification. In the presented facts, the Polish company planned to take over a daughter company with its registered seat in another European Union country. The planned operation was primarily dictated by the desire to centralize and simplify the process of asset management, obtain savings from merger and meet challenges in connection with the anticipated effects of the COVID-19 pandemic.

“Estonian” CIT since 2021 in Poland?

The Polish Prime Minister presented the concept of the introduction of the so called “Estonian CIT”. This solution  assumes that companies:

  • with a turnover of up to PLN 50 million,
  • employing at least 3 employees,
  • whose partners/shareholders are exclusively natural persons,
  • without capital involvement in other entities,
  • whose operating income constitutes the majority of their income,

will not be obliged to pay corporate income tax (further: CIT) provided they do not pay profit (e.g. in the form of dividends) and allocate it for development of the companies. This solution should be available for a period of 4 years with the possibility of extension for another period.

According to unofficial comments from Ministry of Finance officials, this solution means:

  • lack of: advance payments, annual settlements, tax accounting, declarations and many other administrative obligations,
  • no need to determine what is the tax deductible cost and what is not, no need to calculate depreciation or apply a minimum tax, etc.

The above aims to increase the production capacity of Polish companies and foreign enterprises investing in Poland.

Installations and devices separated from the building may constitute separate fixed assets

According to the individual interpretation of the Director of the National Fiscal Information issued on 20 May, 2020 (no. 0111-KDIB1-1.4010.125.2020.1.SG) complete and fit for use installation consisting of technical devices with connecting wires, cabling, ducts and other elements of equipment or components are separate fixed assets subject to depreciation at the appropriate rates. In the case presented, the company explained that the installations and devices extracted from the building are complete and will be used in business operations for more than a year. In addition, they can be dismantled without damaging the building. The director of the National Fiscal Information confirmed that these may be separate fixed assets provided they meet the conditions specified in the Polish CIT Act.

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