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Rzeźnicza 32-33
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Michal Lesiuk
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Because of the rapidly changing regulatory framework in Poland, readers should obtain updated information before engaging in transactions.
A. At a glance
Corporate Income Tax Rate (%) 5/9/19 (a)
Capital Gains Tax Rate (%) 19
Branch Tax Rate (%) 19
Withholding Tax (%)
Dividends 19 (b)(c)
Interest 20 (d)(e)
Royalties 20 (d)(e) Services 20 (f)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0 Carryforward 5 (g)
(a) The preferential 5% tax rate applies to “qualified income” obtained from the qualifying intellectual property (IP) created, developed or improved by a taxpayer as part of its research and development (R&D) activity. The reduced 9% corporate income tax rate on income other than income from capital gains applies to small taxpayers whose revenue from sales did not exceed the zloty (PLN) equivalent of EUR2 million in the preceding year (gross, including value-added tax [VAT]) and in the current year (net, excluding VAT).
(b) This tax is imposed on dividends paid to residents and nonresidents. (c) This rate may be reduced by a tax treaty, or under domestic law, if certain conditions are met (see Section B).
(d) This rate applies only to interest and royalties paid to nonresidents. (e) The tax rate may be reduced by a tax treaty or under domestic law if certain conditions are met (see Section B). (f) This withholding tax applies only to service payments made to nonresidents. (g) No more than 50% of the original loss can be deducted in one year unless the loss is below PLN5 million. Tax losses can reduce taxable income only from the same income source.
B. Taxes on corporate income and gains
Corporate income tax. Resident companies (including companies in the process of incorporating or registering) are subject to corporate tax on their worldwide income and capital gains. Nonresident companies are taxed only on income earned in Poland. For corporate income tax purposes, Polish-source income includes income (revenue) from, among others, the following: • Activities conducted in Poland, including activities of foreign permanent establishments located in Poland
• Real estate located in Poland or rights resulting from such real estate (including sales of real estate or related rights)
• Transfers of shares (stocks), participation rights in partnership profits, investment fund certificates as well as receivables con nected with those rights, if real estate located in Poland, di rectly or indirectly, accounts for at least 50% of the total value of the assets
• Transfer of ownership of shares (stocks), all rights and obliga tions, participation titles or rights of a similar nature in a real estate company
• Securities and derivatives listed on a stock exchange in Poland, including income (revenue) from the sales or execution of re sulting rights
• Receivables settled by Polish taxpayers, regardless of the place where the agreement was concluded or where the agreed action was performed
A company is resident in Poland for tax purposes if it is incorpo rated in Poland or managed in Poland. For this purpose, the concept of management is broadly equivalent to the effective management test in many treaties. The definition of management was amended as of 1 January 2022. A branch of a nonresident company is generally taxed according to the same rules as a Polish company. Partnerships (civil law partnerships and general partnerships with some exceptions) are tax transparent except for foreign partnerships that are treated in their countries as taxpay ers subject to corporate income tax. Polish limited joint-stock partnerships are treated as corporate income tax taxpayers. From 1 January 2021, under an amending law, limited partnerships are treated as corporate income taxpayers (that is, eliminating tax transparency of such entities). In a similar manner, general part nerships are subject to corporate income tax in Poland if partners (who are not exclusively natural persons) in such a partnership are not disclosed to the tax authorities. The limited partnerships are able to decide whether the new regulations imposing the corporate income taxpayer status will apply from 1 January 2021 or from 1 May 2021.
Income from an overseas permanent establishment of a Polish resident company is taxable in Poland, subject to tax treaties.
Tax rates. The general corporate income tax rate is 19%. In the limited cases mentioned below, the rate is 5% or 9%.
5% tax rate for qualifying IP activity. Effective from 1 January 2019, an Innovation Box Regime (IBR) is introduced. The IBR is aimed at incentivizing innovative R&D activities by taxing prof its from qualifying IP rights at a preferential 5% tax rate.
The preferential 5% tax rate applies to the “qualified income” derived from qualifying IP created, developed or improved by a taxpayer as part of its R&D activity covering the following:
• Patents
• Extensions of patent protection
• Protected utility models
• Registered industrial designs
• Registered topographies of integrated circuits
• Extensions of patent protection for medicinal products and plant protection products
• Registered medicinal and veterinary products admitted to trad ing
• Registered new varieties of plants and animal breeds
• Rights to computer programs protected under national or inter national law
The amount that is subject to the preferential 5% tax rate (the qualified income amount) corresponds to the amount calculated as the income obtained from the qualifying IP right multiplied by a ratio established in accordance with a particular formula based on the Organisation for Economic Co-operation and Development (OECD) recommendations. From 1 January 2022, it is possible to apply both the IP Box Regime and R&D credit.
Nine percent tax rate for small entities. Effective from 1 January 2019, a reduced 9% corporate income tax rate on income other than income from capital gains has been introduced, replacing the prior reduced 15% tax rate. Broadly, the reduced rate applies on the condition that an entity is a small taxpayer (its revenues in a given and preceding year do not exceed the equivalent of EUR2 million).
The 9% corporate income tax rate does not apply to taxpayers that were created as a result of certain restructuring activities including, among others, mergers, spin-offs (demergers), transfor mations (except transformations that do not change the status for corporate income tax purposes; that is, both prior and after the transformation the entity remains a corporate income tax taxpay er) and contributions in-kind (including contributions of an orga nized part of an enterprise; that is, a going concern).
Minimum tax on corporate taxpayers. The minimum revenuebased corporate income tax is levied on taxpayers to whom the following applies to in a given tax year:
• They incurred tax losses within an operating income basket.
• They reported a tax-profitability ratio (in an operating income basket) below 1%.
However, for the purpose of calculating the above, costs incurred for an acquisition or improvement of fixed assets (also deprecia tion write-offs) are not taken into account. For the purposes of calculating the minimum tax, revenues and costs related to the transactions in which the price or the method of determining the price of the subject of the transaction results from the provisions of laws or normative acts are not taken into account.
The tax is calculated as 10% of the sum of the following (subject to some deductions):
• 4% of operating revenues (that is, tax revenue other than from capital transactions)
• Part of the related-party debt financing costs exceeding a spe cific threshold.
• Deferred tax asset derived from the revealing for tax purposes an intangible asset resulting in an increase of gross profits or a decrease of gross losses
• Part of the costs of services (that is, advisory, marketing, man agement and control, insurance and guarantees), royalty pay ments incurred (also indirectly) for the benefit of related parties exceeding a specific threshold.
The rules provide for certain exceptions from this new tax for new taxpayers (in their first, second and third tax year of operations), financial institutions, taxpayers with revenues lower than at least 30% of revenues earned in the previous tax year, and taxpayers with no subsidiaries of any kind and whose only shareholders (stockholders) are natural persons. The revenue-based minimum corporate income tax is deductible from the regular annual corpo rate income tax due in Poland.
Further changes are planned with respect to the application of minimum tax, including postponing the effective date of the new minimum tax to 1 January 2023 (or until the end of a taxpayer’s tax year that started during 2022).
New tax incentives package. From 1 January 2022, a new tax incentives package entered into force. It includes the following measures:
• Significant enhancement of the existing (R&D) relief and IP Box regime: a possible deduction of additional 200% employment costs for those involved in an R&D activity
• Relief for innovative employees: reduction of monthly personal income tax advances by a portion of a non-utilized R&D deduc tion, for companies whose low or lack of operating income prohibits them from fully applying the R&D relief
• Relief for “robotization:” deduction of additional 50% of costs of brand new industrial robots, their machines and peripheral devices, and intangible assets to use these robots, including related training services
• Relief for prototypes: deduction of 30% of costs of trial produc tion of a new product and of introducing it to the market (up to 10% of operating income)
• Relief for business expansion and consolidation (deduction of up to PLN250,000 annually) and initial public offerings (including advisory costs to some extent)
Capital gains. Effective from 1 January 2018, capital gains consti tute a separate revenue “basket” from other sources of revenue. Capital gains include, among others, the following:
• Revenues from sharing in profits of legal entities, including, among others, the following:
— Dividends
— Revenues from redemption of shares (stock)
— Proceeds from liquidation of a company
— Profits of a company designated to increase its share capital as well as amounts transferred from other capital of a company to increase its share capital
— Additional payments received in connection with a merger or demerger of a company by entities that have the right to share in profits of that company
— Revenues derived by a shareholder of a demerged company, if property taken over as a result of the demerger or a prop erty remaining at the level of a demerged company does not constitute an organized part of the business
— Additional payments received in connection with an exchange of shares
— Undivided profits and profits designated to capital other than share capital in a transformed company in the case of its transformation into a partnership
— Interest from certain profit-participation loans
— Revenues from transformations, mergers or demergers
— Revenues derived as a result of liquidation of a partnership, exiting such an entity or decreasing the interest in it, if Poland loses the right to tax income from the disposal of the acquired assets
• Revenues from a contribution in kind to a company
• Revenues from shares in a company other than those mentioned above, including the following:
— Revenues from the disposal of shares (including disposal of shares as a part of a redemption process)
— Revenues from an exchange of shares
• Revenues from the disposal of an interest in a partnership
• Revenues from the disposal of receivables acquired by a taxpayer and receivables connected with revenues treated as capital gains
• Revenues from the following:
— Certain property rights (including copyrights, licenses, industrial property rights and know-how), excluding reve nues from licenses directly connected with revenues not treated as capital gains
— Securities and derivatives, excluding derivatives hedging revenues or costs that are not treated as capital gains
— Participations in investment funds or institutions for common investments
— Renting or disposal of the above rights
In general, taxable income from a given source should be calcu lated as the difference between taxable revenues from that source and tax-deductible costs connected with that source of income. Taxable income or loss should be calculated separately for capital gains and for other sources of income. Capital losses do not off set income from other sources and vice versa.
Capital gains derived by nonresidents from sales and other dispos als of state bonds issued on foreign markets may be effectively exempt from tax in Poland under domestic regulations if certain conditions are satisfied.
Administration. The Polish tax year must last 12 consecutive months, and it is usually the calendar year. However, a company can choose a different period of 12 consecutive months as its tax year by notifying the relevant tax office by certain deadlines. The first tax year after a change must extend for at least 12 months, but no longer than 23 months. If a company incorporated in the first half of a calendar year chooses the calendar year as its tax year, its first tax year is shorter than 12 months. A company incor porated in the second half of a calendar year may elect a period of up to 18 months for its first tax year (that is, a period covering the second half of the year of incorporation and the subsequent year).
In general, companies must pay monthly advances based on pre liminary income statements. Monthly declarations do not need to be filed. In certain circumstances, a company may benefit from a simplified advance tax payment procedure.
Companies must file an annual income tax return within three months after the end of the company’s tax year. They must pay any balance of tax due at that time. From 2023, there will be an
obligation to provide an electronic version of accounting books to the tax authorities.
An overpayment declared in an annual tax return is refunded within three months. However, before the overpayment is refund ed, it is credited against any past and current tax liability of the company. If the company has no tax liability, it may request that the tax office credit the overpayment against future tax liabilities or refund the overpayment in cash. Overpayments earn interest at the same rate that is charged on late payments. Under the tax code, the rate of penalty interest on unpaid taxes varies according to the fluctuation of the Lombard credit rate. The interest rate on tax arrears is 200% of the Lombard credit rate, plus 2%. It cannot be lower than 8%. The penalty interest rate was 8% on 1 January 2022.
Dividends. A 19% withholding tax is imposed on dividends and other profit distributions (other revenues from sharing in profits of legal entities) paid to residents and nonresidents, subject to provisions of double tax treaties and the European Union (EU) Parent-Subsidiary Directive. Resident recipients do not aggregate domestic dividends received with their taxable income subject to the regular rate. For nonresident recipients, the withholding tax is considered a final tax and, accordingly, the recipient is not subject in Poland to any further tax on the dividend received.
Polish companies (joint-stock partnerships, effective from 1 January 2014 and limited partnerships, effective from 1 January 2021), other European Economic Area (EEA; the EEA consists of the EU countries and Iceland, Liechtenstein and Norway) companies and Swiss companies are exempt from tax on dividends received from Polish subsidiaries, profits of a sub sidiary (or amounts from certain capital) designated to increase its share capital and undivided profits of a subsidiary and profits designated to capital other than share capital on transformation of the subsidiary into a partnership, if they satisfy all of the following conditions:
• They are subject to income tax in Poland, an EU/EEA member state or Switzerland on their total income, regardless of the source of the income (the exemption applies also to dividends or other profit distributions paid to permanent establishments, located in EU/EEA member states or in Switzerland, of such companies).
• They do not benefit from income tax exemption on their total income (which should be documented with their written state ment).
• For at least two years, they hold directly at least 10% (25% for Swiss recipients) of the capital of the company paying the divi dend. The two-year holding period can be met after payment is made. If the two-year holding period is eventually not met (for example, the shareholder disposes of the shares before the twoyear holding requirement is met), the shareholder must pay the withholding tax and penalty interest. Broadly, except for some specific cases, full ownership of the shares is required.
• The Polish payer documents the tax residency of the recipient with a certificate of residency issued by the competent foreign tax authorities (if payments are received by a permanent estab lishment, some other documents may be needed).
• A legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is established, under a double tax treaty or other ratified inter national treaty to which Poland is a party.
• The dividend payer is provided with a written statement con firming that the recipient of the dividend does not benefit from exemption from income tax on its worldwide income, regardless of the source from which such income is derived.
The above exemption does not apply to revenues earned by a general partner from its share in the profits of a limited partner ship or a general partner from its share in the profits of a limited joint-stock partnership.
The tax exemption for inbound dividends and the exemption from withholding tax on outbound dividends do not apply if the divi dends are connected with an agreement, other legal action or a series of related actions and if the main purpose or one of the main purposes is to benefit from these tax exemptions (see Section E).
The application of exemptions from withholding tax or reduced treaty rates (above certain thresholds) may be subject to a pay and refund mechanism (see Withholding tax collection mechanism).
Specific rules exist regarding the corporate income taxation of the general partner of a limited partnership and a general partner of a limited joint-stock partnership. In general, such partner is subject to regular withholding tax on dividends in Poland. However, the amount of withholding tax on revenue earned by a general partner in a limited partnership or a limited joint-stock partnership is reduced by the amount calculated by multiplying the percentage of the share in profits attributable to the general partner and the amount of the tax due on the total income of the limited partnership or the limited joint-stock partnership.
Specific rules regarding exemption from tax on dividends exist with respect to the limited partner of a limited partnership (that is, 50% of income derived by the limited partner of a limited partnership having its seat or place of management in Poland from the profits of such a limited partnership is exempt from tax on dividends. However, the amount of exempted income cannot exceed PLN60,000 in a given tax year, calculated separately from the profits of each such limited partnership of which the taxpayer is a limited partner. This exemption does not apply to the limited partner of a limited partnership having its seat or place of man agement in Poland if the limited partner holds, directly or indi rectly, at least 5% of the shares (stock) in an entity being a legal person or a company in an organization that is a general partner in such a limited partnership, or is a member of the management board, of any of the following:
• An entity being a legal person or a company in organization that is a general partner in such a limited partnership
• An entity holding, directly or indirectly, at least 5% shares (stock) in an entity being a legal person or a company in an organization that is a general partner in such a limited partnership
• A related entity, in the meaning of the respective Polish corpo rate income tax regulations, to the member of the management board or the partner of the entity holding, directly or indirectly,
at least 5% shares (stock) in an entity being a legal person or a company in organization that is a general partner in such a limited partnership
The income (revenue) allocated to a Polish branch is subject to regular taxation in Poland. Withholding tax is not imposed on transfers of profits from such branch to its head office because from a legal perspective, a branch is regarded as an organiza tional unit of the foreign enterprise.
Interest, royalties and service fees. Under the domestic tax law in Poland, a 20% withholding tax is imposed on interest, royalties and fees for certain services paid to nonresidents.
Under most of Poland’s tax treaties, the withholding tax on fees for services may not be imposed in Poland.
The full exemption applies to interest and royalties paid to quali fying entities if the following conditions are met:
• The payer is a company that is a Polish corporate income taxpayer (the exemption does not apply to limited partnerships and joint-stock partnerships) with a place of management or regis tered office in Poland (the exemption applies also to payments made by permanent establishments located in Poland of entities subject to income tax in the EU on their total income, regardless of the source of the income, provided that such payments qualify as tax-deductible costs in computing the taxable income subject to tax in Poland).
• The entity earning the income is a recipient of such income and is a company subject to income tax in an EU/EEA member state (other than Poland) on its total income, regardless of the source of the income (the exemption applies also to payments made to permanent establishments of such companies if the income earned as a result of such a payment is subject to income tax in the EU member state in which the permanent establishment is located). In addition, the company must not benefit from income tax exemption on its total income.
• For at least two years, the recipient of the payments holds di rectly at least 25% of the share capital of the payer or the payer holds directly at least 25% of the share capital of the recipient of the payments. This condition is also met if the same entity holds directly at least 25% of both the share capital of the payer and the share capital of the recipient of the payments and such entity is subject to income tax in an EU/EEA member state on its total income, regardless of the source of the income. The two-year holding period can be met after payment is made. If the two-year holding period is eventually not met (for example, the share holder disposes of the shares before the two-year holding re quirement is met), the shareholder must pay the withholding tax together with the penalty interest. Full ownership of the shares is required.
• The Polish payer documents the tax residency of the recipients of the payments with a certificate of tax residency issued by the competent foreign tax authorities (if payments are received by a permanent establishment, some other documents may be needed).
• A legal basis exists for a tax authority to request information from the tax administration of the country where the taxpayer is
established, under a double tax treaty or other ratified interna tional treaty to which Poland is a party.
• The recipient of the payments provides a written statement con firming that it does not benefit from exemption from income tax on its total income, regardless of the source of the income, and that it is the “beneficial owner” (see below) of the payments received.
The application of exemptions from withholding tax or reduced treaty rates (above certain thresholds) may be subject to the pay and refund mechanism described below.
Withholding tax collection mechanism. Effective from 1 January 2022, a significant tax reform entered into force, including a revision of the rules regarding withholding tax on dividends, interest and royalty payments. The new measures provide for a replacement of the prior direct application of withholding tax exemptions or treaty rates with a “pay and refund” system. There are two regimes depending on whether the total amount of dividend, interest and royalty payments paid to a foreign taxpayer in one tax year exceeds PLN2 million (approximately USD500,000). If the annual total amount of qualified payments does not exceed PLN2 million, the formal conditions required for application of a treaty rate or an exemption generally remain the same (includ ing obtaining certificate of residency, with the exception of a new beneficial owner definition, which is more stringent). However, it is now explicitly stated that when determining whether a treaty rate or exemption can apply, the tax remitter is obliged to assure due diligence, which should take into account the nature and scale of the recipient’s business activity.
In cases in which qualified payments to a single recipient exceed PLN2 million annually, the general rule is that a payer should remit withholding tax on the excess over PLN2 million annually at standard rates (19% for dividends and 20% for interest and royalty payments). In such cases, tax treaty rates or exemptions, as well as those provided for by domestic provisions implement ing the EU Parent-Subsidiary Directive and Interest-Royalties Directive, must be disregarded and standard rates should apply. The following are two exceptions to this rule:
• The tax remitter provides a statement confirming fulfillment of all conditions required for the withholding tax exemption or treaty rate.
• An opinion is issued by the tax office on request.
If the tax authorities find out that the above statement is not true, a sanction may be imposed corresponding to 10% of the payment made or 20% for payments in excess of PLN15 million (USD3.8 million). The same penalties apply if the remitter (Polish company) did not carry out the required verification of substance/beneficial owner test, or the due diligence was not adequate for the nature and scale of the remitter’s business.
Pay and refund mechanism. If neither of the above measures is applied (tax remitter’s statement or a tax office’s opinion), withholding tax must paid at the statutory rates. In such a case, the tax could be claimed back provided that the conditions were met. The refund could be claimed either by the taxpayer or tax remitter (if it incurred the economic burden of tax).
Beneficial ownership definition. As of 1 January 2019, the defi nition of “beneficial owner” was changed to require proof that the recipient conducts real business activity in the country of its seat, taking into account certain criteria, such as premises, suf ficient local staff, broad business rationale and local board mem bers. The rules were amended again in January 2022 and do not include a direct reference to the substance criteria (the controlled foreign company [CFC] test); nevertheless, in practice the approach remains the same. Other conditions that need to be satisfied include the following:
• The recipient receives a payment for its own benefit, can decide how the received payment should be utilized, and bears eco nomic risk associated with the loss of all or a portion of this receivable.
• The recipient is not a broker, representative, trustee or any other entity that is legally or actually obliged to transfer all or part of the payment to another entity. Under the Corporate Income Tax Act, a beneficial owner is an entity receiving income for its own benefit, and is not an intermediary, agent, trustee or another entity obliged to pass on all or part of the income to another entity.
Foreign tax relief. Under its tax treaties, Poland exempts foreignsource income from tax or grants a tax credit (usually with re spect to dividends, interest and royalties). Broadly, foreign taxes are creditable against Polish tax only up to the amount of Polish tax attributable to the foreign income.
In addition to a credit for tax on dividends (that is, a deduction of withholding tax; direct tax credit), Polish companies (or Polish permanent establishments of EU/EEA resident companies) may also claim a credit for the tax on profits generated by their subsid iaries in other treaty countries (indirect or underlying tax credit). A Polish company receiving a dividend from a subsidiary that is not resident in the EU, EEA or Switzerland may deduct from its tax the amount of income tax paid by the subsidiary on that part of the profit from which the dividend was paid if the Polish parent company has held directly at least 75% of the foreign subsidiary’s shares for an uninterrupted period of at least 2 years. The total deduction is limited to the amount of Polish tax attributable to the foreign income.
Foreign-source dividends are added to other profits of a Polish taxpayer and are taxed at the standard 19% rate.
Dividends from companies resident in EU/EEA states or in Switzerland may be exempt in Poland if the Polish recipient holds directly at least 10% (25% in the case of Switzerland) of the share capital of the foreign subsidiary for an uninterrupted period of at least 2 years. The shareholding period requirement does not have to be met as of the payment date. The exemption does not apply if the dividends (or dividend-like income) are deductible for tax purposes in any form.
The tax exemption for inbound dividends does not apply if the dividends are connected with an agreement or other legal action or a series of related actions and if the main purpose or one of the main purposes is to benefit from this exemption (see Section E).
The above exemption also does not apply if income from the participation, including redemption proceeds, is received as a result of the liquidation of the legal entity making the payments.
The domestic exemption or tax credit can be applied if a legal basis exists for a tax authority to request information from the tax administration of the country from which the income was derived, under a double tax treaty or other ratified international treaty to which Poland is a party.
Broadly, except for some specific cases, full ownership of the shares is required to claim the credits and exemptions discussed above.
C. Determination of trading income
General. Taxable income is calculated as the sum of taxable income from the capital gains basket (source) and taxable income from other sources of revenues. Taxable income from a given source of revenue equals the difference between taxable revenues and tax-deductible costs related to that source in a given tax year. If tax-deductible costs are higher than revenues, the difference constitutes a tax loss from a given source of revenue. Taxable income or loss should be calculated separately for capital gains and for other sources of revenue. Capital losses do not offset income from other sources and vice versa.
In general, taxable revenues of corporate entities carrying out business activities are recognized on an accrual basis. Revenues are generally recognized on the date of disposal of goods or prop erty rights or the date on which services are supplied (or supplied in part), but no later than the following:
• Date of issuance of the invoice
• Date of receipt of payment
If the parties agree that services of a continuous nature are accounted for over more than one reporting period, revenue is recognized on the last day of the reporting period set out in the contract or on the invoice (however, not less frequently than once a year).
The definition of revenues includes free and partially free benefits.
Expenses are generally allowed as deductions if they relate to tax able revenues derived in Poland, but certain expenses are specifi cally disallowed. Payments in the amount of at least PLN15,000 should be made through a bank account; otherwise, effective from 1 January 2017, such expenses might not be allowed as deductions for tax purposes. Additionally, payments exceeding PLN15,000 need to be made to a bank account listed on a socalled approved list if the invoice is issued by an active VAT payer. Otherwise, unless the tax office is informed on time, the cost needs to be treated as a non-tax-deductible cost. Starting from 2023, the limit will be reduced to PLN8,000 unless regulations change by then.
Branches and permanent establishments of foreign companies are taxed on income determined on the basis of the accounting records. However, regulations provide coefficients for specific revenue categories, which may be applied if the tax base for
foreign companies cannot be determined from the accounting records.
Limitation on the deductibility of costs of intangible services and royalties. Effective from 1 January 2018 until the end of 2021, fees for certain intangible services and royalties in part exceeding the limit of the sum of 5% of the adjusted tax base (broadly, 5% of taxable earnings before interest, taxes, depreciation and amor tization [EBITDA]) and PLN3 million were not deductible for tax purposes. In particular, the limit applies to the following:
• Services such as advisory, market research, advertising, man agement, data processing, insurance, providing guarantees and other similar services
• Payments for the use of licenses, trademarks and certain other rights
• Payments for credit-risk instruments or derivatives regarding non-banking loans, made directly or indirectly to related parties or entities in a prohibited list territory or state
Certain exceptions existed, including direct costs of goods or services sold and transactions for which a taxpayer obtains an Advanced Pricing Agreement (APA) from the Polish Ministry of Finance.
A carryforward mechanism of five years for non-deducted costs was provided, with certain restrictions.
The limitation mentioned above was abolished, starting from 1 January 2022. There are, however, other new rules that may potentially impact deductibility or taxation of such items.
Hidden dividends. Payments classified as “hidden dividends” are not deductible for Polish corporate income tax purposes. According to the legislative explanation, the intention of the new regulations is to prevent the tax deductibility of payments that economically are profit distributions. Under these new provi sions, costs incurred by a corporate taxpayer in relation to a ser vice or other performance provided by a related entity (not only a shareholder) can be disallowed for corporate income tax pur poses if they are determined to constitute “hidden dividends.” These costs are regarded as “hidden dividends” if one of the following conditions is met:
• The amount and/or timing of the payment are dependent on the profit earned.
• A taxpayer acting reasonably would not incur such costs or would incur them in a lower amount if the benefit were pro vided by an unrelated entity.
• These costs comprise remuneration for the right to use assets that were owned by the shareholder or an entity related to the shareholder prior to establishing the paying entity.
However, fulfillment of the tests under the second and third bul lets above can be waived if the total amount of costs regarded as the hidden dividends (based on these two bullets) in a given tax year is lower than the amount of gross profit (based on the accounting provisions) generated in a financial year in which these costs were included in the taxpayer’s financial result. The regulations will take effect on 1 January 2023 unless the draft proposal published in 2022 is passed and the rules on hidden dividends are entirely deleted from the corporate income tax law.
Depreciation. For tax purposes, depreciation calculated in accor dance with the statutory rates is deductible. Depreciation is computed using the straight-line method. However, in certain circumstances, the reducing-balance method may be allowed. The following are some of the applicable annual straight-line rates.
Asset Rate (%)
Buildings 1.5 to 10*
Office equipment 14
Office furniture 20
Computers 30
Motor vehicles 20
Plant and machinery 4.5 to 20
* For used buildings, an individual depreciation rate may be applied (the mini mum depreciation period is calculated as a difference between 40 years and the time of use of the building).
For certain types of assets, depreciation rates may be increased. Companies may also apply reduced depreciation rates.
Intangibles are amortized over a minimum period, which usu ally ranges from 12 months (for example, development costs) to 60 months (for example, goodwill).
Certain limitations with respect to the tax depreciation of real property and residential properties have been introduced from 1 January 2022.
Relief for losses. Losses from the capital gains basket may not offset income from another basket (source) and vice versa. Losses from a given basket (source) may be carried forward to the fol lowing five tax years to offset profits from that source of income that are derived in those years. Up to 50% of the original loss may offset profits in any of the five tax years, with an exception to tax losses not exceeding PLN5 million. Losses from capital gains cannot offset profits from another source and vice versa. Losses may not be carried back. Certain restructurings may cause prema ture expiration of tax losses.
Groups of companies. Groups of related companies (only limitedliability companies, joint-stock companies and simple joint-stock companies) may report combined taxable income and pay one combined tax for all companies belonging to the group. To qualify as a tax group, related companies must satisfy several conditions, including the following:
• The average share capital per each company is not lower than PLN250,000.
• The parent company in the tax group must directly own 75% of the shares of the subsidiary companies.
• The agreement on setting up a tax group must be concluded for a period of at least three years. It must be concluded in written form and registered with the tax office.
• The members of the group may not benefit from any corporate income tax exemptions based on laws other than the Corporate Income Tax Act.
In practice, the applicability of the rules for tax groups were previously limited, primarily as a result of the profitability requirement and certain other restrictive conditions. However,
because the profitability requirement has been abolished, it is expected that tax grouping will become more common.
From 1 July 2022, there will be also a possibility to establish VAT groups in Poland, subject to certain conditions. VAT groups will be created by entities with financial, economic and organiza tional links that make an appropriate agreement, select the VAT group’s representative and file their VAT group registration form together with the VAT Group agreement to the tax office. VAT groups will be available not only to taxable persons that are mem bers of tax capital groups. Transactions between VAT group members will be beyond the scope of VAT (no requirement to charge and deduct VAT). A VAT group will file a single JPKV7M in the name of the whole group. A VAT group must continue in effect for not less than three years (with a renewal option).
D. Other significant taxes
The following table discusses other significant taxes.
Nature of tax Rate
Value-added tax (VAT); imposed on goods sold and services rendered in Poland, exports, imports, and acquisitions and supplies of goods within the EU; Poland has adopted most of the EU VAT rules; certain goods and services are exempt Standard rate 23%
Reduced rates (applicable to specified goods and services indicated in the VAT Act, such as food, agricultural products and medical equipment) 5%/8% Exports and supplies of goods within the EU 0% Tax on retail sales; imposed on revenues earned on retail sales; for purposes of this tax, revenues from retail sales are revenues earned on sales of goods to consumers (that is, individuals not engaged in economic activity) in Poland that are connected with the taxpayer’s business activity (effective from 1 January 2021)
Monthly revenues between PLN17 million and PLN170 million 0.8%
Monthly revenues exceeding PLN170 million 1.4% Tax on certain financial institutions; monthly tax on assets of selected financial institutions (domestic banks, consumer loan lending institutions and insurance companies as well as branches of foreign banks and insurance companies; tax base is the excess of total assets of the taxpayer over PLN4 billion (in some cases, lower thresholds may apply); tax is due monthly; taxpayers must file self-assessment declarations by the 25th day of the following month; tax is not deductible for corporate income tax purposes in Poland 0.0366%
Nature of tax Rate
Tax on commercial property (malls and office buildings) with an initial value exceeding PLN10 million (effective from 1 January 2018); an exception exists for office buildings used solely or mainly for the own purposes of the taxpayer; the tax is payable monthly and is creditable against the corporate income tax 0.035% Sugar tax; introduced as of 1 January 2021; relates to the supply of beverages with the addition of sugar, other sweeteners and/or caffeine and taurine; the entity required to settle the tax is usually the producer/wholesaler supplying the beverages to the entity conducting retail sales, but also possibly the producer or entity that purchases the beverages from outside Poland conducts retail sales
Content of sugars in an amount equal to or less than 5g in 100ml of drink, or for the content in any amount of at least one sweetener referred to in the specific regulation PLN0.5 For each gram of sugar over 5g in 100ml of drink per liter of drink PLN0.05 Beverages containing addition of caffeine or taurine per liter of drink PLN0.1
E. Miscellaneous matters
Foreign-exchange controls. Polish-based companies may open foreign-exchange accounts. All export proceeds received in con vertible currencies and receipts from most foreign sources may be deposited in these accounts. Businesses may open foreign currency accounts abroad. However, restrictions apply to the opening of accounts in countries that are not members of the EU, EEA or the OECD. No permit is required for most loans obtained by Polish-based companies from abroad, including loans from foreign shareholders. Reporting requirements are imposed for certain loans and credits granted from abroad.
Anti-avoidance legislation. In applying the tax law, the tax authorities refer to the substance of a transaction in addition to its form.
If under the name (legal form) of the transaction, the parties have hidden some other transaction, the tax authorities may disregard the name (legal form) used by the parties and determine the tax implications of the transaction on the basis of actual intent of the parties.
If the tax authorities have doubts about the existence or the sub stance of the legal relationship between the parties, they refer the case to the common court to establish the type of the actual legal relationship.
Polish anti-avoidance rules implementing EU Council Directive 2015/121 of 27 January 2015 are effective from 1 January 2016. These rules were amended, effective from 1 January 2019. Under these rules, the tax exemption for inbound dividends, as well as the exemption from withholding tax on outbound dividends, do not apply if the dividends are connected with an agreement or
other legal action or a series of related actions and if the following three circumstances exists:
• The main purpose or one of the main purposes of the agreement or action is to benefit from the above tax exemptions.
• The application of the exemption does not result only in elimi nation of double taxation.
• Such agreement or other legal action has no real character.
For purposes of the above rule, an agreement or other legal action does not have real character to the extent that it is not performed for justified economic reasons.
The above anti-abuse rule applies only to entities that can benefit from withholding tax exemption based on the Polish domestic rules implementing the EU Parent Subsidiary Directive.
Certain anti-avoidance rules relate to the neutrality of a merger, demerger and a share-for-share exchange.
A bill adding a General Anti-Abuse Rule (GAAR) to the Polish Tax Ordinance Act entered into force on 15 July 2016. The GAAR was amended, effective 1 January 2019. Broadly, under the GAAR provisions, tax authorities shall disregard an arrangement or a series of arrangements that have been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law and accordingly is not genuine (artificial). In such a case, the tax implications of a transaction are determined by reference to the facts that would have been generated if a suitable transaction (or, if suitable, no transaction) had been carried out. The GAAR does not apply if an entity receives a securing opinion issued by the head of the National Tax Administration (Krajowa Administracja Skarbowa, or KAS). A separate procedure, which costs PLN20,000 (approximately EUR4,500), exists for obtaining such a securing opinion. GAAR regulations do not apply to VAT (a separate regulation exists) and non-tax budget revenues. If GAAR is applied, additional tax of up to 30% of the additional tax base (for corporate income tax) can be imposed.
Mandatory Disclosure Regime. Effective from 1 January 2019, Poland introduced a Mandatory Disclosure Regime requiring certain intermediaries (including non-Polish tax consultants, banks and lawyers) and, in some situations, taxpayers to report certain arrangements (reportable arrangements) to the relevant tax authority.
Arrangements are reportable if they contain certain features (hallmarks). The Polish legislation extends the scope of the reporting required under the Council of the EU Directive 2018/822 of 25 May 2018, amending Directive 2011/16/EU, to include the following:
• The definition of reportable tax arrangements is extended to comprise not only cross-border but also domestic tax arrange ments.
• The definition of covered taxes is widened to include VAT.
• Additional hallmarks are added.
• Like the directive, reporting applies to cross-border arrange ments for which the first step of implementation takes place after 25 June 2018. In addition, reporting applies to tax arrangements defined by domestic law for which the first step of implementation occurs after 1 November 2018.
Broadly, tax arrangements commencing on or after 1 January 2019 are reportable within 30 days after earliest of the following dates:
• The scheme is available for the client.
• The scheme is ready for implementation.
• The scheme is started.
In the event of failure to meet the above obligation, the tax authorities may impose financial penalties.
Debt-to-equity rules. Apart from the above, targeted regulations address certain specific transactions.
Thin-capitalization rules. The Polish thin-capitalization rules limit deductibility of the excess of financing costs over interest income to 30% of the adjusted tax base (broadly, 30% of taxable EBITDA). The limitation applies also to financing provided by third parties. A safe harbor for financing costs up to PLN3 mil lion per year is provided. Deduction is explicitly limited to one of the parameters set by either a PLN3 million annual threshold or 30% of taxable EBITDA. Nondeductible costs can be carried forward up to five consecutive years, within a relevant basket of income. The rules do not apply to certain financing institutions.
In addition, in certain events, rules limit deductibility of interest when the acquisition of shares was debt financed (so-called “debt push-down” scenarios).
Controlled foreign companies. Effective from 1 January 2015, certain income or gains derived by foreign subsidiaries of Polish taxpayers that fulfill the definition of a CFC are subject to tax in Poland. The CFC rules were subsequently modified, effective from 1 January 2018, 1 January 2019 and 1 January 2022.
Under the rules in effect from 1 January 2022, the following foreign companies are considered CFCs:
• A foreign company that has its registered office or management or is registered or located in a prohibited list territory or state
• A foreign company that has its registered office or management or is registered or located in a state with which Poland or the EU has not concluded an agreement containing an exchangeof-information clause
• A foreign company that fulfills all of the following criteria:
— A Polish taxpayer holds individually or together with related parties or other taxpayers having their place of residence or management in Poland, directly or indirectly, at least 50% of the shares, voting rights or profit participation rights in this company.
— At least 33% of this company’s revenues is derived from dividends and other revenues from sharing in the profits of legal persons, disposals of shares in companies, all rights and obligations in partnership companies, titles of participa tion in investment funds, joint investment institutions or other legal persons and rights of a similar nature, receiv ables, consulting, accounting, market research, legal ser vices, advertising, management and control data processing, employee recruitment and acquisition services and similar services, leases, subleases, tenancies, subtenancies and other contracts of a similar nature, interest and benefits from loans, interest part of lease installments, guarantees,
copyrights or industrial property rights, including the sale of such rights, copyrights or industrial property rights included in the sale price of a product or service, the sale and execu tion of rights from financial instruments, insurance, banking or other financial activities and transactions with related parties if the entity does not generate economic value added in connection with these transactions or if the value is insig nificant.
— The tax paid by this company is lower than 25% of the difference between tax that would have been paid if the com pany was a Polish tax resident and that the tax actually paid by that company is not subject to refund or deductible.
A CFC’s income is subject to tax in Poland at 19% at the level of the Polish shareholder. The shareholder is taxed on the part of the profits of the CFC in which the shareholder participates after deducting dividends received from the CFC and gains on dispos als of shares in the CFC, if they are included in the shareholder’s tax base (these amounts may be deducted in the following five tax years). The tax payable in Poland may be decreased by the relevant proportion of corporate income tax paid by the CFC.
CFCs in prohibited list territories or states (and to some extent, CFCs in non-treaty countries) are subject to more restrictive rules.
Taxation under the CFC rules does not apply if the CFC is subject to tax on its worldwide income in an EU/EEA member state and carries a “substantial genuine business activity” in that state.
The CFC rules also apply to taxpayers carrying on business activ ity through a permanent establishment located outside of Poland, with certain exceptions, as well as to non-Polish tax residents carrying out its activities through a permanent establishment located in Poland to the extent that such activities are connected with activities carried out by the permanent establishment located outside Poland.
Effective from 1 January 2019, certain anti-abuse provisions have been introduced. Under these provisions, artificial relation ships that distort the relations or status of a foreign entity for CFC purposes are disregarded.
Taxation of “shifted profits.” The taxation of “shifted profits” (also referred to as taxation of undertaxed payments) would impose corporate income tax of 19% in Poland on certain quali fied payments made directly or indirectly to related entities if effective taxation is lower by at least 25% of the hypothetical corporate rate of 19% (that is, lower than hypothetical 14.25% corporate income tax). Additional tests and exceptions could apply.
Polish holding regime. From 1 January 2022, the concept of a Polish holding company is introduced. A Polish holding company may enjoy an exemption for 95% of dividends received from qualified subsidiaries and a capital gains tax exemption on sales of shares of such qualified subsidiaries, subject to certain condi tions. The status of “holding company” will depend on, among other things, conducting real economic activity (assessed based on CFC regulations).
Investment agreement with Ministry of Finance. The Polish gov ernment has introduced the concept of an investment agreement for strategic investors who would like to agree regarding a variety of tax consequences related to their investment.
The agreement (commonly referred to as Interpretation 590) concluded with the Ministry of Finance will set forth certain tax consequences of the investment that a given investor intends to carry out in Poland. It will be binding on the tax administration and should enable the business to obtain comprehensive tax clearance regarding its investment in Poland.
It is generally available to investors planning an investment in Poland worth at least PLN100 million (approximately USD26 million) and, from 2025 onward, PLN50 million (approx imately USD13 million). Separate applications to various tax authorities (for example, individual tax rulings, APAs, GAAR clearance) are not required, as all of these matters would be cov ered with one investment agreement.
Standard audit file for tax purposes. The standard audit file for tax (SAF-T) is a standardized form for transmitting tax information to the tax authorities. The format in which SAF-T reports are prepared is XML.
The scope of information that should be transferred to the tax authorities in the form of SAF-T covers the following:
• Account books
• Bank account statements
• Inventory turnover
• Invoices
• VAT registers
• Tax revenue and expense ledger
• Revenue records
The above structures should generally be provided to the tax au thorities at their request. However, the SAF-T for the VAT regis ter needs to be provided to the Ministry of Finance on a monthly basis automatically (that is, no summons of the tax authorities is required in the case of this item).
For “large enterprises,” a requirement to submit all of the SAF-T structures on demand of the tax authorities has applied since 1 July 2016. From that date, “large enterprises” are required to submit the SAF-T files for the VAT register on a monthly basis. For this purpose, “large enterprises” are entities that have met in at least one of the last two financial years either of the following criteria:
• Annual headcount of not less than 250 (on a yearly average)
• Annual volume of sales of at least EUR50 million and assets amounting to at least EUR43 million
Other entities (medium, small and micro enterprises) must sub mit the on-demand SAF-T structures to the tax authorities from 1 July 2018. However, they must submit the SAF-T files for the VAT register on a monthly basis from the following dates:
• Medium and small enterprises: 1 January 2017
• Micro enterprises: 1 January 2018
The tax authorities conduct automatic controls of SAF-T reports submitted by taxpayers.
In 2020, a new SAF-T for VAT was implemented. A new struc ture (Form JPK_V7M [submitted monthly] or JPK_V7K [sub mitted quarterly]) replaced the existing SAF-T for VAT registers and VAT returns (VAT-7, VAT-7K, VAT-27, VAT-ZT, VAT-ZZ and VAT-ZD). The scope of information reportable under the new SAF-T is broader than the scope of information reported under the previous version. The new JPK_V7 consists of the following two sections:
• Evidence section of JPK_V7, which covers the data relating to the sales and purchases that took place in a given period. In addition, detailed information can be split into obligatory and optional data. The evidence section as a rule includes the infor mation presented previously in the JPK VAT registers submit ted.
• Declarative section of JPK_V7, which covers the data from the VAT declaration but in a different format.
JPK_V7 also introduces additional requirements for the enter prises and accountants, including the following:
• The use of GTU codes for the goods and services
• The use of procedural transaction codes
• The use of document classification codes
The new SAF-T scheme entered into force on 1 October 2020 and applies to all taxpayers (large, medium, small and microenterprises).
E-invoices in the National e-Invoices System. From 1 January 2022, entrepreneurs are able to use the e-invoice system volun tarily. The seller will be in a position to issue an e-invoice through the National e-Invoices System (KSeF), but an invoice of that type will require the recipient’s consent to be sent in the system. From 1 January 2024, the system will be obligatory with respect to all invoices. E-invoices should be issued in the XML format (similar to that of the SAF-T; see Standard audit file for tax pur poses.). The system assumes real-time reporting.
Exit tax. As required by the EU, Poland has introduced an exit tax, effective from 1 January 2019. This is an income tax on unrealized profits (hidden reserves) that are embedded in a tax payer’s property and that are potentially transferred together with such property outside of Poland in the following actions:
• The property is transferred within the same taxpayer (for exam ple, a transfer by a Polish resident to its permanent establishment located abroad or a transfer by a nonresident operating through a Polish permanent establishment to its home country or to another country in which it operates).
• The taxpayer’s residence is changed.
Exit tax on unrealized profits is calculated as the difference between the fair market value of the property transferred (estab lished based on separate rules) and its tax book value (that would have applied had the given property been disposed of) as of the date of the transfer.
Transfer pricing. The Polish tax law includes specific rules on transfer pricing. Effective from 2017, fundamental changes were
introduced regarding the obligations and scope with respect to transfer-pricing documentation, followed by changes effective from 2019 and from 2023. The main rules, which are based on the OECD guidelines, are contained in the Corporate Income Tax Act and the Personal Income Tax Law. Several Decrees of the Ministry of Finance and official announcements of the Ministry of Finance were published to provide details regarding the word ing of the law.
Effective from 2019, the definition of related parties is changed significantly. The amended law broadens the scope of entities that may fall within this definition and incorporates additional anti-abuse rules. The amended law has removed the relations resulting from employment from the definition.
Under the Corporate Income Tax Act, the following entities are considered to be related parties:
• An entity and at least one other entity over which it exercises significant influence
• A natural person, including a spouse or a relative to the second degree of relation and an entity, and an entity over which he or she exercises significant influence
• An entity that exercises significant influence over a company without legal personality and such company and its partners
• The taxpayer and its permanent establishment, and in the case of a tax capital group, a capital company belonging to the group and its permanent establishment
Under the amended law, parties whose relations are held or estab lished without business justification, including relations aimed at the manipulation of the ownership structure or the creation of circular ownership structures, are treated as related parties.
The following is considered to be significant influence:
• Owning directly or indirectly at least 25% of shares in capital, the voting rights for the control of the managing authorities of the company or shares or rights for participation in profits, property or expectative, including participation units and in vestment certificates
• The actual ability of a natural person to influence the key busi ness decisions undertaken by a legal person or an organiza tional unit without legal personality
• Being married or being a relative to the second degree
In 2019, the catalog of the transfer-pricing methods was revised in that methods are now considered equal. The tax law provides for the following transfer-pricing methods:
• The comparable uncontrolled price method
• The resale-price method
• The cost-plus method (significant change of the definition aligning it with the OECD definition)
• The transactional net margin method
• The profit-split method
If none of the above methods can be used, other methods may be applied, including valuation techniques. A Decree of the Ministry of Finance provides further details on the application of the valuation techniques for transfer-pricing purposes.
The revised Corporate Income Tax Act also incorporates new rights of the tax authorities to reclassify or not recognize a transaction under several conditions.
The Polish Decrees on transfer pricing also provide detailed rules regarding the preparation of comparability analyses as well as business restructurings.
Effective from 2017, an obligation to prepare a three-tiered stan dardized transfer-pricing documentation was introduced. It is amended from 2019 (and to a small extent from 2022), with the following main changes:
• Documentation thresholds for controlled transactions were changed. Depending on the type of transaction, the thresholds are PLN2 million or PLN10 million.
• Documentation thresholds for controlled transactions were changed. Depending on the type of transaction, the thresholds are PLN2 million or PLN10 million. Starting in 2022, new regulations regarding the transactions concluded with entities located in a tax haven were introduced. According to the regula tions, a Local File is required in the following instances:
— The transactions concluded with related and unrelated enti ties located in a tax haven exceed PLN100,000.
— The transactions concluded with related and unrelated par ties exceed PLN500,000 and the beneficial owner is located in a tax haven. It is presumed that the beneficial owner is domiciled in a tax haven if the other party to the transaction makes settlements with an entity that has its registered office or management board in a territory or in a country applying harmful tax com petition in the tax year.
• The threshold requiring entities to have Master File documenta tion was changed. The Master File should be provided within 12 months after the end of the tax year, provided that consoli dated financial statements are prepared by the group, that the group has generated consolidated revenues exceeding PLN200 million and that the Polish entity is required to prepare Local File documentation.
• The threshold for the preparation of benchmarking analyses was removed. Benchmarking analyses covering comparable data and selection process should also be available in electronic form. They need to be revised every three years, or earlier in the case of significant change of the market conditions. Starting from 2022, regulations introducing the possibility to waive the preparation of benchmarking analysis were introduced for the following:
— Controlled transactions concluded by taxpayers that are micro or small businesses (applicability for the tax year beginning in 2021)
— Transactions other than controlled transactions concluded with tax havens (direct transactions) or in which the actual owner of the counterparty is a resident of a tax haven (indi rect transactions), covered by the documentation obligation (applicability for the tax year beginning in 2021)
• Some types of controlled transactions are excluded from the documentation requirement.
• Safe harbors for selected service transactions and loans are introduced.
• The scope of Local File and Master File documentation was revised.
• A tax return on transfer pricing (TPR-C) is introduced, replac ing the CIT TP return. It requires taxpayers to report a signifi cant amount of information regarding intragroup relations, including the categories of transfer-pricing methods and the profitability achieved on the transactions and how it corre sponds to the benchmarking results. As from 2023, the TP Statement (statement confirming that the transfer-pricing documentation was prepared and the prices are of arm’s length) will be combined with the TPR-C form.
The Local File documentation must be prepared in Polish and in electronic form. However, the Master File may be provided in English (during a tax audit, the tax authorities may request that the taxpayer translate the Master File within 30 days). From 2023, local transfer-pricing documentation must be prepared by the end of the 10th month after the end of the entity’s tax year, and TPR-C transfer-pricing information must be filed by the end of the 11th month after the end of the entity’s tax year.
Taxpayers must submit a signed declaration confirming that local transfer-pricing documentation is in place and that the transferpricing policy used conforms with the arm’s-length principle within nine months after the end of the tax year. The statement needs to be signed by members of the management board and cannot be provided by the proxy. Lack of declaration or the filing of an untrue declaration is penalized based on the Penal Fiscal Code.
As from 2023, the TP Statement (statement confirming that the transfer-pricing documentation was prepared and the prices are of arm’s length) will be combined with the TPR-C form.
The Master File needs to be prepared (not provided) within 12 months from year-end. The above deadlines were extended by three months for 2019 only as a result of the COVID-19 pan demic.
Taxpayers must present transfer-pricing documentation within seven days after the date of the request of the tax authorities. However, from 2023, the deadline for submitting local transferpricing documentation at the request of the tax authorities has been extended from 7 to 14 days.
If the tax authorities assess additional income to a taxpayer real izing intragroup transactions, the additional tax liability is calcu lated by the tax authorities to be a value of 10% of the additional income reassessed. The value of the additional tax liability is doubled if a taxpayer does not provide the transfer-pricing docu mentation required by the law or provides documentation that is incomplete or if the additional income reassessed exceeds a value of PLN15 million. If both of these conditions are fulfilled, the additional tax liability is tripled.
Penalties from the Penal Fiscal Code may be applied.
The APA regulations entered into force on 1 January 2006 and were changed in 2019. An APA concluded for a particular trans action is binding on the tax authorities with respect to the method selected by the taxpayer. APAs may apply to transactions that have
not yet been executed or transactions that are in progress when the taxpayer submits an application for an APA.
In June 2006, Poland ratified the EU convention on the elimina tion of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC).
Effective from 2015, it is possible to eliminate double taxation in domestic transactions.
Polish headquarters with consolidated revenues (as defined in the Accounting Act) in Poland and outside of Poland that exceeded in the previous tax year the equivalent of EUR750 million must file a CbCR report within 12 months after the end of the report ing year of the group. The first reporting year was 2016. In addition, Polish law includes a secondary filling mechanism (under this mechanism, if no agreement on the exchange of tax informa tion exists between two given countries and if no other entity from the group is responsible for the preparation of a CbCR re port, the Polish tax authorities may request the Polish entity to prepare a CbCR report).
Polish subsidiaries are required to file with the Head of Tax Administration a notification on which entity within the group is responsible for CbCR preparation. Such notification should be filed by the end of the tax year (the exceptional deadline for the 2016 tax year was 10 months from the year-end).
Financial penalties up to an amount of PLN1 million can be im posed for not fulfilling reporting obligations. These penalties can be imposed on the entities belonging to the group that, despite the obligation to submit the CbCR report, failed to do so, provided incomplete information or did not send a notification. Under the Fiscal Penal Code, a fine of up to 240 daily rates (the daily rate is calculated based on the minimum wage in force in Poland on the day on which a penalty is imposed) may be im posed on entities acting on behalf of or in the taxpayer’s interest that submit false information about entities that are part of a group.
F. Treaty withholding tax rates
The standard withholding tax rates are 19% for dividends and 20% for interest and royalties. The rate may be reduced under a double tax treaty on presentation of a certificate of tax residence or, in some cases, under domestic regulations. Poland ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or “MLI”), which may modify the application of Polish double tax treaties starting from 1 January 2019. The following table shows the withholding tax rates under Polish double tax treaties without taking into account the impact of the MLI.
Dividends Interest Royalties
Albania 5/10 (d) 10 5
Algeria (gg) 5/15 (d) 0/10 (k) 10
Armenia 10 5 10
Australia 15 10 10
Austria 5/15 (a) 0/5 (k) 5
Azerbaijan 10 10 10
Bangladesh
Dividends Interest Royalties % % %
10/15 (a) 0/10 (k) 10
Belarus 10/15 (e) 10 0
Belgium 0/10 (cc) 0/5 (k) 5
Bosnia and
Herzegovina
5/15 (r) 0/10 (k) 10
Bulgaria 10 0/10 (k) 5
Canada 5/15 (a) 0/10 (pp) 5/10 (qq)
Chile 5/15 (c) 4/5/10 (dd)(ee) 2/10 (h)(ee)
China Mainland 10 0/10 (k) 7/10 (h)
Croatia 5/15 (d) 0/10 (k) 10
Cyprus 0/5 (oo) 0/5 (k) 5
Czech Republic 5 0/5 (k) 10
Denmark
0/5/15 (s) 0/5 (k) 5
Egypt 12 0/12 (k) 12
Estonia 5/15 (d) 0/10 (k) 10
Ethiopia 10 10 10
Finland 5/15 (y) 0/5 (k) 5
France 5/15 (a) 0 0/10 (p)
Georgia 10 0/8 (k) 8
Germany 5/15 (jj) 0/5 (k) 5
Greece 19 10 10
Hungary 10 0/10 (k) 10
Iceland 5/15 (y) 0/10 (k) 10
India 10 0/10 (k) 15
Indonesia 10/15 (c) 0/10 (k) 15 Iran 7 0/10 (k) 10
Ireland 0/15 (kk) 0/10 (k) 0/10 (v)
Israel 5/10 (b) 5 5/10 (h)
Italy 10 0/10 (k) 10
Japan 10 0/10 (k) 0/10 (i)
Jordan 10 0/10 (k) 10
Kazakhstan 10/15 (c) 0/10 (k) 10 Korea (South) 5/10 (a) 0/10 (k) 5
Kuwait 0/5 (z) 0/5 (k) 15 Kyrgyzstan 10 0/10 (k) 10
Latvia 5/15 (d) 0/10 (k) 10 Lebanon 5 0/5 (k) 5
Lithuania 5/15 (d) 0/10 (k) 10 Luxembourg 0/15 (oo) 0/5 (k) 5 Malaysia (ss) 0 15 15
Malta 0/10 (hh) 0/5 (k) 5
Mexico 5/15 (d) 0/10/15 (k)(aa) 10
Moldova 5/15 (d) 0/10 (k) 10 Mongolia 10 0/10 (k) 5
Morocco 7/15 (d) 10 10
Netherlands (ss) 5/15 (a) 0/5 (k) 5
New Zealand 15 10 10
Nigeria (gg) 10 0/10 (k) 10
North Macedonia 5/15 (d) 0/10 (k) 10
Norway 0/15 (hh) 0/5 (k) 5
Pakistan 15 (j) 0/20 (k) 15/20 (n)
Philippines 10/15 (d) 0/10 (k) 15 Portugal 10/15 (o) 0/10 (k) 10
Qatar 5 0/5 (k) 5
Romania 5/15 (d) 0/10 (k) 10