Tax news for financial institutions
Summary of key tax developments for financial institutions in Poland.
Article 15e of the Polish CIT Law — which has been limiting tax deductibility of costs of certain intangible services (e.g. management, data processing) purchased from related parties — is set to be revoked. Please refer to our previous newsletter for details.
However, the Polish government intends to replace Article 15e with an extra (additional to the standard 19% CIT) tax on gross profits. The new tax, so-called “minimum revenue tax”, will apply to:
- taxpayers who incurred a tax loss (excluding amortisation/depreciation), or
- taxpayers whose taxable income (increased by amortisation/depreciation) is lower than 1% of their taxable revenue.
The tax base will consist of:
- 4% of gross taxable revenues,
- plus the amount of costs not deductible under former Article 15e,
- plus financing costs not deductible under the thin capitalisation rules (Article 15c),
- plus deferred tax asset (DTA) recognised on some intangible assets previously not subject to amortisation.
The new tax will amount to 10% of the taxable base. So, generally speaking, it will amount to at least 0.4% of gross taxable revenues. However, it will also include 10% of costs that were not deductible under Article 15e (with some minor changes — like excluding the exemption for a direct link between a service purchased and a service rendered).
This will be a minimum tax, because its amount will be deducted from the regular 19% CIT.
There will be some exemptions from the above tax, e.g. for financial institutions (like banks or insurers; but not for loan companies, leasing companies, factors or shared service centres) or during the first three years of the taxpayer’s operations.
In its ruling of 11 March 2021 (C-812/19, Danske Bank), the CJEU confirmed that where transactions take place between establishments of the same legal entity, in order to analyse whether VAT implications will arise, consideration must be given to their VAT grouping status. If one or both establishments belong to a VAT group, then by extension they should be treated as separate taxable persons. Those transactions, therefore, need to be considered within the scope of VAT.
However, Polish tax authorities seem not to have followed this interpretation — if the headquarters are part of a VAT group, but the branch is not (this is the so-called reversed Skandia case), general terms apply and there is no taxable supply between a branch in Poland and its headquarters abroad, even if the headquarters are part of a VAT group. The CJEU ruling has not changed this standpoint — since the Danske Bank case, the Polish Director of the National Tax Information has issued at least three individual tax rulings presenting the view that a Polish branch should not recognise any import of services purchased from the headquarters (even if the headquarters are part of a VAT group).
This will change once Poland introduces VAT grouping rules (which is expected from the beginning of 2022). Planned amendments apply to situations involving a branch — they stipulate clearly than when a branch or the head office is part of a VAT group, all transactions between a branch and the head office will be considered for VAT purposes and cannot be disregarded. It will affect VAT (both: deductible input and charged output) of financial institutions operating in Poland through a branch.