Tax on shifted profits

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:

  1. Relatively low level of taxation imposed in the related party recipient country – the tax rate lower than 14.25%;
  2. High level of passive income – qualifying payments exceed 50% of gross revenue;
  3. 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);
  4. Qualifying payments treated as tax deductible exceed, from 2023, 3% of the taxpayer’s tax deductible costs reported.

How can we help?

We assess if the criteria making the company liable to the shifted profit tax occur and verify the tax position of foreign related entities (full scope or limited scope audit - depending on the arrangements and needs).

We calculate the shifted profit tax if needs to be paid, including possible deductions. We prepare the tax return (CIT/PD appendix).

We verify the business substance attributed to recipients of payments allowing to not involve them in the taxable basis, including: dedicated questionnaire, on-site visit, preparation of the report summarising the audit, providing comments and recommendations to the existing documentation/preparation of a related party’s statement outlining the key implications confirming conducting genuine business activity in the seat country.

Feel free to contact us

Bartosz Doroszuk

Partner | Tax adviser
T: (+48) 790 732 266

Sebastian Serowik

Manager | Tax adviser
T: (+48) 721 763 001