Changes in Polish legislation in 2022

published on 7 December 2021 | reading time approx. 2 minutes

 
Multinational corporations may be seriously affected by the legislative changes in Poland from 1 January 2022. They will apply particularly to Polish companies making substantial payments to their foreign associated enterprises.

       

The "Polish Deal" legislative package:

 

1) introduces a minimum tax that depends on income amount and will be payable by taxpayers who make no profit or very little profit; the taxable base will consist of, among other things, fees for intangible services paid to associated enterprises and debt financing costs


2) levies income tax on shifted profits. That tax will be imposed on costs of:

• advisory services, market research, advertising, management and control, data processing, insurance, guarantee and surety services and similar
• all kinds of fees and charges for use or the right to use rights or intangible assets
• transfer of the risk of debtor's insolvency on account of loans other than loans granted by banks and credit unions, including under derivatives agreements and similar
• debt financing costs connected with the procurement and use of the money, especially fees, commission fees, bonuses, interest, interest portion of a lease instalment, penalties and charges for late payment of liabilities and costs of hedging liabilities, including the costs of derivative instruments
• charges and fees for the transfer of functions, assets or risks

The tax will be levied on costs paid to associated enterprises if the sum of those costs in a tax year accounts for at least 3 percent of all tax-deductible costs. The taxable person is the entity which pays those costs.

  

3) introduces new withholding tax regulations which will obligate the withholding agent to deduct the tax on certain payments in Poland, which can be reclaimed only later. The 'pay and refund' mechanism is limited to payments exceeding 2 million zloty in a tax year

  

4) repeals Article 15e of the CIT Act, which limits the tax-deductibility of expenses for intangible services purchased from associated enterprises

  

Nevertheless, keep in mind that the legislative package introduces regulations concerning the so-called hidden dividend with effect from 01/01/2023. The new regulations will make certain payments to associated enterprises non-tax-deductible if:

• their due date or amount are conditional on the taxpayer making a profit
• a prudent taxpayer would never make such a payment or would pay less
• the company makes those payments as a fee for using assets which were previously owned by a company's shareholder or its associated enterprise

The effective date of the regulation has been postponed and perhaps it will be modified further.

   

Additionally, with effect from 1 January 2022 the Polish Deal package will:

• change taxation of employee salaries – depending on the salary amount the changes may be for better or for worse or neutral for the employees and as such may reshape the labour market in Poland
• change social insurance contributions on management board remunerations;
• change transfer pricing reporting obligations and change again the deadlines for transfer pricing obligations