Tax Highlights

Table of contents:

1. The so called real estate companies that do not depreciate real estate in accordance with the accounting regulations may not depreciate them for tax purposes
2. The deadline for submitting CIT-8 tax return will be postponed to 30 June 2022
3. VAT exemption specified in art. 43 sec. 1 point 10 of the VAT Act covers both the building constituting the fixed asset and the commercial commodity
4. How to settle in tax costs primary and secondary fit-outs expenses
5. Employment in Poland of an employee who performs only preparatory or auxiliary activities for a foreign company does not lead to the establishment of a foreign permanent establishment on the territory of Poland
6. Bad debts can be tax deductible under certain conditions

The so called real estate companies that do not depreciate real estate in accordance with the accounting regulations may not depreciate them for tax purposes

The Ministry of Finance unofficially confirmed that real estate companies which in their accounting books measure their investment properties at market price or otherwise determined fair value and therefore do not depreciate them for accounting purposes, can no longer depreciate them for tax purposes. From 1 January 2022, in case of real estate companies, the depreciation write-offs of real estate (i.e. fixed assets included in group 1 of the classification) may not be higher than the depreciation write-offs made in accordance with the accounting regulations.
At the same time, the Ministry of Finance points out that under the CIT Act, the costs of acquiring or manufacturing fixed assets may, as a rule, constitute tax deductible costs in the case of sale of fixed assets for consideration.

The deadline for submitting CIT-8 tax return will be postponed to 30 June 2022

According to the draft regulation posted on the website of the Government Legislation Center, the deadline for submitting the CIT-8 annual tax return is to be postponed to 30 June 2022. The new deadline will be applicable to all CIT payers whose tax year ended in the period from 1 December 2021 until 28 February 2022. The regulation is also to extend the deadline for paying the tax for the previous year. The draft regulation is expected to enter into force.

VAT exemption specified in art. 43 sec. 1 point 10 of the VAT Act covers both the building constituting the fixed asset and the commercial commodity

The Provincial Administrative Court in Gliwice, in its judgment ref. I SA / GL 1058/21 stated that the supply of newly constructed residential premises located in the reconstructed hotel building should not be subject to the VAT exemption provided for in art. 43 sec. 1 point 10 of the VAT Act. The judgment changed the tax interpretation, in which the tax authority recognized that “improvement” is a concept that applies only to fixed assets. However, according to the court, the classification of a building as a commercial commodity should not be relevant for determining whether its supply is taxable or exempt from tax.
The recognition that the supply of a significantly rebuilt building should be exempt from tax only because it is classified as a commercial commodity, makes it impossible to deduct the input tax in the investment process that results in the construction of a completely new facility, and thus violating the principle of VAT neutrality.

How to settle in tax costs primary and secondary fit-outs expenses

According to the individual interpretation of the Director of the National Tax Information of ref. 0111-KDIB1-1.4010.626.2021.1.SH expenses incurred on primary and secondary fit-outs, which are not settled in costs through depreciation write-offs, made for a specific tenant and sold to him, will constitute tax costs directly related to the revenues and should be included in tax costs on the date of obtaining the corresponding revenues..
On the other hand, with regard to expenses on primary and secondary fit-outs, which are made for the needs of a specific tenant, which are not subject to separate resale of expenditures but are included in the rent, it is possible to include them as tax costs, other than costs directly related to revenues from the concluded lease agreements, i.e. on the date it is incurred. The date when the tax expense is incurred is the date on which the expense is entered in the accounting books (booked) on the basis of the invoice received and not on the date the premises are handed over to the tenant.

Employment in Poland of an employee who performs only preparatory or auxiliary activities for a foreign company does not lead to the establishment of a foreign permanent establishment on the territory of Poland

The Hungarian company hired an employee in Poland to provide services to this company. The Provincial Administrative Court in Gliwice in the judgment ref. I SA / GL 1609/21 concluded that there was no permanent establishment in Poland, as the employee does not perform any activities that result in the transfer of ownership of the company’s goods, he has no influence on the wording of contracts concluded between the company and the buyers of the goods, does not shape or negotiate any elements of these agreements. The company’s office in Poland should be considered to be solely of a preparatory and auxiliary character.

Bad debts can be tax deductible under certain conditions

The taxpayer may recognize as a tax expense bad debts previously included in receivable due. However, lack of their recoverability should be documented and they should not be time-barred. This is the opinion of the Director of the National Tax Information presented in binding tax ruling, ref. No. 0111-KDIB1-2.4010.334.2021.AW. The tax authority also decided that the recognition of receivables as tax deductible costs may take place on an ongoing basis, i.e. on the date these receivables are written off in the accounting books as uncollectible.
In the factual state of this case, the taxpayer’s contractor was liquidated. The claims before the liquidation of the contractor were not time-barred and will not be time-barred on the date of their writing and possible recognition in tax deductible costs.

Legal Highlights

Table of contents:

1. Contemplated amendment of spatial regulations
2. Works on amending the Act on Land and Mortgage Registers and Mortgage

Contemplated amendment of spatial regulations

At the beginning of 2022, a draft for major amendment to the Act on local planning and development and certain other acts (“Draft”) was made available on the official website of the Mister of Development and Technology. The Draft envisages a number of revolutionary changes in the field of spatial planning. The most important changes include the replacement of the spatial study with a general plan, which is an act of local law that will cover the entire area of a municipality and specify in a general and concise manner the purpose of particular areas. On its basis, the zoning authorities will adopt integrated investment plans and issue zoning permits. The integrated investment plan will be adopted at the request of an investor, after conclusion of an urban planning agreement, and will specify the terms and conditions for execution of a given investment specified by the investor. In addition, the Project significantly limits the possibility of issuing zoning permits as these decisions will be issued only in the areas of the so-called “development completion”, which will be delineated as part of the general plans. Pursuant to the Draft, a zoning permit cannot be issued for specific renewable energy system installations and will be temporary (i.e. valid for 3 years only). Currently, the draft is at the preliminary stage of public consultations and legislative works, and therefore may be subject to numerous amendments. However, the process should be closely observed since the target date for the Project to enter into force is 1 January 2023.

Works on amending the Act on Land and Mortgage Registers and Mortgage

The Ministry of Justice is working on a draft amendment to the Act on Land and Mortgage Registers and Mortgage. It is planned to empower notaries to make entries in land and mortgage registers on separation of new apartment properties and disclosure of mortgages. The purpose of these changes is to speed up registration process and to relieve courts. These changes assume that the interested parties will have a choice which path to follow – the current one or the one provided by the amendment. An entry made by a notary public will have the same effect as an entry made by a court clerk.
Another assumption of the proposed changes is to protect borrowers from being burdened with additional, non-refundable costs by banks while waiting for the entry. Fees charged to borrowers constitute a kind of ‘insurance’ of credit risk that practically does not exist because in the vast majority of cases mortgage is registered in accordance with the application. Therefore, the project would assume that the fee paid is a deposit that shall be returned or credited towards credit repayment.