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24-07-2017
Not all interest paid by companies will be tax deductible – expected changes

Draft of changes to Polish income taxes published in July 2017 provides for many revolutionary amendments, including limitations for tax deductibility of interest, according to which:

 

1.    Interest on debt financing of CIT taxpayers, whose debt financing surplus of costs over revenue in a given  year exceeds 120k PLN (about 30k EURO) will be tax deductible only up to  30% of EBITDA.

2.    Interest on  debt financing shall include: all kind costs related to gaining and using funds from other entities (also unrelated parties), especially interests (also capitalized), fees, commissions, premiums, leasing interests, penalties and charges for delay in payment of liabilities, costs of security duties (including derivatives), no matter for whom they are incurred - related or unrelated parties (including the bank).

3.    CIT act does not refer directly to EBITDA, but indicates the way of its calculation – the income for CIT purposes increased by value of deducted depreciation (excluding amortization of intangible assets) in given tax year and by a difference between external financing costs and revenues.

4.    Financial entities are out of the scope of the limitations.

5.    Debt financing costs not deducted for CIT purposes under the CIT act limitations may be deducted in the scope of the limits in the next five tax years.

6.    Current thin capitalization regulations will be derogated.

7.    PIT taxpayers are not covered by the limitations regarding deductibility of interests for income tax purposes.

8.    Under transitional provisions, current thin capitalization rules for loans/credits transferred to the taxpayer before the day of the entry into force of the amending act (1st January of 2018 is planned) are applied to the end of 2018.

 

 

According to the draft, for taxpayers having a tax year as a calendar year, amendments will come into force from 1st January 2018.

 

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Should you be interested in obtaining further information, or would like to discuss the impact of the above changes please contact:

 

Monika Dziedzic      tel. + 48 22 322 68 88

 

or your advisor at MDDP.

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