Changes in CIT and PIT for 2021 have been published in the Journal of Laws of the Republic of Poland.
The most important changes are:
Limited partnerships [spółki komandytowe] as CIT taxpayers
- Limited partnerships will become CIT taxpayers. This means a transition from a single taxation model to double taxation (at the level of the partnership and at profit distribution to partners). The new rules for taxation of a limited partnership will enter into force on 1 January 2021. However, limited partnerships may decide to apply them from 1 May 2021.
- The act introduces an exemption for limited partners [komandytariusze] of such partnerships that are legal persons, analogically to the exemption for dividends from companies.
- The act introduces a partial exemption from income tax on revenues for limited partners of such partnerships that are natural persons (unless they are related parties) (50% of revenues obtained from a limited partnership, but not more than PLN 60.000 based on one limited partnership per year).
- General partners [komplementariusze], within 5 years from the end of the tax year following the year in which profit was made, will be able to deduct from the income tax calculated on the income from the participation in the limited partnership’s profits the amount of tax paid by this partnership, in proportion to the general partner’s profit obtained from participation in such a partnership (subject to the optimization goal of establishing the partnership by its partners).
Taxation of general partnerships [spółki jawne]
- General partnerships will become CIT taxpayers only if the partnership fails to provide the head of tax office [Naczelnik Urzędu Skarbowego] with information about CIT or PIT taxpayers who have the right to participate in the partnership’s profit, either directly or through non-taxpayers of income tax.
Real estate companies
- The act introduces a definition of a real estate company into the tax law – a company in which as at the last day of the previous fiscal year at least 50% of carrying amount of the assets constituted, directly or indirectly, the value of real estate located in Poland, and the value exceeded PLN 10.000.000. If the company is not a taxpayer of income tax – at least 60% of the company’s revenues are revenues from rental, sublease, lease or similar agreements relating to real estate or rights to the real estate or shares in other real estate companies.
- The act also provides for a separate definition new entities.
- A real estate company as a payer of a tax on the sale of shares in this company – a new mechanism transferring the tax settlement obligation arising from the sale of shares in the so-called real estate companies from the seller to the real estate company.
- For real estate companies outside the EU or EEA (i.e. Switzerland, UK after Brexit) there will be an obligation to appoint a tax representative by real estate companies without a registered seat or corporate management in Poland.
- Real estate companies will have an obligation to disclose to the head of national tax authority [Szef Krajowej Administracji Skarbowej] shareholders holding directly or indirectly at least 5% of shares (stocks) or 5% of the rights to participate in the profit of such a real estate company. A similar obligation will apply to partners.
- The Act introduces the annual obligation to draw up and publish a report on the implementation of the tax policy by Tax Capital Groups and taxpayers whose revenue for the previous year exceeds EUR 50.000.000. The information has to be posted on the taxpayer’s or related parties’ website.
- The scope of provided information is very wide and covers: information on planned or undertaken restructuring activities, applications for advance tax rulings, submitted MDRs, related-party transactions the value of which exceeds 5% of total balance sheet assets, etc.
- It is unclear whether the first strategy should be published for 2021 or 2020.
Limiting deduction of tax losses in case of restructuring activities
- The act limits the possibility of settling losses in certain restructuring cases, e.g. when the taxpayer has taken over another entity or the taxpayer has received a in-kind contribution in the form of an enterprise or its organized part or a cash contribution for which the taxpayer has acquired an enterprise or an organized part of an enterprise.
Hand-over of oftangible assets
- The amendment introduces taxation of a hand-over of tangible assets in the event of company liquidation. On the side of the company handing over the liquidation assets, the tax consequences of hand-over of the tangible assets are aligned with the tax consequences of the sale thereof.
- Introducing provisions resulting from ATAD-II (hybrid mismatch).
- Increasing the limit of revenues entitling a taxpayer to apply the reduced 9% CIT rate from EUR 1.2 million to EUR 2 million.
- Limiting the possibility of lowering/increasing depreciation rates for fixed assets received from 1 January 2021 if a taxpayer takes advantage of the tax exemption (incl. activities in a special economic zone).
- Extending the scope of transactions subject to verification in terms of their compliance with the arm’s length principle when the beneficial owner is registered in the so-called “tax haven”.
- Introducing further exemption from income tax on revenues from buildings also in the event of the state of epidemic related to SARS-CoV-2 virus being still effective in Poland after 31 December 2020.
- Lump sum taxation, being a sort of a deferral of income tax to the moment of dividend distribution, will apply to companies which select such a system for four years. Companies will have to be owned by individuals, have an annual turnover in the preceding year of up to PLN 100.000.000, and may not participate in other entities and have passive income exceeding 50% of the turnover. There are plenty of other requirements and conditions for this system to apply, including consideration of employment, and investments in new assets, among other factors. Please find the details in a seperate MDDP Alert.
- Introducing similar changes in PIT, and additionally eliminating the so-called abolition relief which is of significance for Poles working abroad.
The content of the regulations has been published in the Journal of Laws of the Republic of Poland. The changes enter into force on 1 January 2021 subject to the possibility of taxation of the limited partnerships according to the new rules from 1 May 2021. Should you have any questions, please contact MDDP experts.
If you are interested in obtaining further information, or would like to discuss the impact of the above on your business activity please contact:
Monika Dziedzic Monika.Dziedzic@mddp.pl tel. + 48 22 322 68 88
Justyną Bautą-Szostak Justyna.Bauta-Szostak@mddp.pl tel. + 48 22 322 68 88
or your MDDP adviser.