The tax on shifted profits applies to cross-border payments of passive nature made to related parties seated outside Poland. Taxpayers meeting certain criteria must pay a 19% tax, levied on the sum of qualifying payments such as: fees for intangible services, royalties, costs related to the transfer of debtor insolvency risk and debt financing, fees for the transfer of functions, assets or risks.
Payments to EU/EEA resident taxpayers are excluded from tax on shifted profits, provided that these taxpayers conduct a genuine economic activity.
Tax on shifted profits may be reduced by withholding tax remitted upon payments included in the shifted profits tax base.
Tax on shifted profits is declared in the CIT/PD – appendix to the annual CIT-8 return.
Which companies must pay the tax on shifted profits?
Shifted profits tax liability exists when the following criteria occur jointly:
- Relatively low level of taxation imposed in the related party recipient country – the tax rate lower than 14.25%;
- High level of passive income – qualifying payments exceed 50% of gross revenue;
- Related party transfers at least 10% of the revenue of passive nature to another entity and such revenue is treated by this related party as the tax deductible costs/reduce its tax base/tax payable or constitute distributable profits (e.g. through dividends);
- Qualifying payments treated as tax deductible exceed, from 2023, 3% of the taxpayer’s tax deductible costs reported.