Taxing shifted profits – how to tackle the new challenge in Poland

The new tax on shifted profits has been implemented via the Polish CIT Act from January 1 2022. Since this tax is settled on annual basis, the upcoming deadline for the annual CIT return would be also the first date in which taxpayers will face the new challenge.

As a rule, the statutory deadline for tax payment falls three months before the end of the tax year. However the Ministry of Finance has recently adopted a regulation on extending the deadline for taxpayers, whose tax year ended between December 1 2022 to February 28 2023, from March 31 to June 30 2023. Thus, the prolonged deadline applies to taxpayers making the tax year the same as the calendar year.

The tax on shifted profits was introduced to combat tax evasion exercised through cross-border payments of a ‘passive’ nature, made to related parties in jurisdictions with low effective tax rates. Importantly, the tax on shifted profits applies only to payments made to recipients seated outside of the EU or EEA. Payments to taxpayers from the EU/EEA are excluded from the new tax, provided that they carry out genuine and tangible business activity.

In this view, Polish taxpayers should particularly examine their potential obligations in view of payments made to related parties in countries such as the USA, UK, Russia, China, Switzerland or Canada.


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