On April 16th, the President of Poland signed a law introducing significant amendments to the Accounting Act and other regulations.
The amendment transposes European Directive 2021/2101 of November 24, 2021, which concerns the disclosure by multinational corporations of information on income tax paid in various countries. Its aim is to increase tax transparency by mandating public reporting by large enterprises (both those based in the EU and those outside the European Economic Area but operating within the EU) on income taxes paid in different countries. These changes are intended to counter aggressive tax planning and tax avoidance and are an addition to existing regulations regarding country-by-country (CbC) reporting.
To this end, a new Chapter 6b titled „Income Tax Report” will be added to the Accounting Act, imposing an additional obligation on specified entities to prepare and publish information about due and paid income taxes in various countries.
Entities required to prepare the statement on income tax report
The reporting obligation will cover large enterprises operating within international groups. In particular, reports must be prepared and published by:
- the ultimate parent entities of a capital group, if revenues shown in the annual consolidated financial statements of the entity exceed 3.5 billion PLN for each of the last two fiscal years,
- standalone entities, if revenues shown in the annual financial statements of the entity exceed 3.5 billion PLN for each of the last two fiscal years.
Only entities that are capital companies, stock-partnership companies, or public partnerships or limited partnerships, whose all partners with unlimited liability are capital companies, stock-partnership companies, or companies from other countries with a similar legal form, will prepare the reports.
The obligation may also apply to ultimate parent entities or standalone entities based outside the European Economic Area (EEA) but conducting business in Poland through a subsidiary or branch that meets the conditions specified in the law, if revenues shown in the annual consolidated financial statements of that dominant or standalone entity exceed 750,000 EUR for each of the last two fiscal years. If the conditions specified in the law are met, the obligation will be fulfilled by the relevant subsidiary or branch.
A subsidiary or branch will also be required to publish and make available a report concerning the ultimate parent entity or the standalone entity if these entities do not provide an income tax report. This report will then include information held by the subsidiary or branch along with a statement that the ultimate parent entity or the standalone entity did not provide the income tax report or the necessary information for its preparation.
The law provides for exclusions from the obligation to prepare a report – for example, when both the parent entity and its subsidiaries or the standalone entity and its branches have their registered office or permanent place of business in Poland.
Deadlines and scope of information
The income tax report must be submitted by the manager of the entity to the appropriate court register within 12 months after the balance sheet date. The report must also be published on the entity’s website within this period and made available for at least 5 years.
The report will be prepared as of the balance sheet date and will cover the entire activity of the standalone entity or the ultimate parent entity, including the activities of all dependent entities included in the consolidated financial statements of the ultimate parent entity. Data will be presented divided by tax jurisdictions where the group’s or standalone entity’s activities may be subject to income tax based on the headquarters, permanent place of business, or permanent economic activity for the fiscal year.
In particular, the report will include such information as a description of the entities’ activities, the number of employees calculated as full-time equivalents, revenues, the amount of profit or loss before taxation, the amount of income tax due in the fiscal year (current tax liability for taxable profits or losses recognized by the entities and branches in the tax jurisdiction, excluding deferred tax and provisions for contingent tax liabilities), the amount of income tax paid in the fiscal year by the entities and branches in the tax jurisdiction (including withholding tax paid by other entities concerning payments to entities and branches within the capital group), the amount of undivided profits from previous years at the end of the fiscal year, and more.
The law also allows the data to be presented according to the regulations issued under Article 87, Paragraph 2 of the Act on Tax Information Exchange with other countries (information about the group of entities – CbC report).
The law specifies that the above data must be presented separately for individual EEA states, as well as for specific tax jurisdictions that are considered „tax havens” and those that have not fully implemented the principles of good tax governance. For other tax jurisdictions, the information will be presented in aggregated form.
The law introduces criminal penalties for failing to prepare and publish the income tax report.
Additional changes
Appropriate changes will also be introduced in the Act on the National Court Register (to technically handle the new requirements) and in the Act on Statutory Auditors, Audit Firms, and Public Oversight.
Effective date
The provisions of the act will apply for the first time to the income tax report for the fiscal year starting after June 21, 2024.
