Upcoming deadline for submission of the CFC – CIT and CFC- PIT forms
Tax alert 18/2016 | 2 September 2016
Taxpayers holding shares in controlled foreign companies (“CFC”) as a rule will be obliged to submit for the first time a separate statement on the income generated by each of the CFC Company.
Who and when should submit CFC declaration?
Submission of the CFC declarations is obligatory for Polish CIT and PIT taxpayers - who hold shares (stocks) in CFC companies that have their place of establishment/management in the jurisdictions considered as tax havens, as well as in other countries where the CFC companies derive their income mainly from passive source taxed currently at the rate lower than 14.25% or exempt from taxation. A foreign branch or a permanent establishment of a Polish taxpayer may also be considered as a CFC company.
A taxpayer holding shares (stocks) in CFC companies is obliged to submit a CFC statement by the end of the 9th month following the end of the CFC company fiscal year. Therefore, if fiscal year of the CFC company corresponds to the calendar year, the deadline for the first submission of the statement falls on the 30th September 2016.
If the taxpayer is not able to determine the tax year of the CFC company or the tax year exceeds a period of consecutive twelve months, CFC company’s tax year should be perceived as the same as for the taxpayer. Thus, taking into account that the Polish provisions implementing CFC taxation may be applied to income derived in a tax year beginning after 31 December 2014 and this tax year corresponds to the calendar year, the first CFC statement should be submitted by the end of September 2016.
One CFC statement for one CFC company
A taxpayer holding shares in more than one CFC Company is obliged to submit a separate CFC statement on the income derived by each CFC.
Keep in mind
In addition to the obligation of submitting CFC statement, CFC taxpayers are also required to keep:
- register of the CFC companies – disclosing the precise number and location of each CFC Company of a taxpayer;
- records of the CFC companies - giving the basis for the determination of the CFC income, tax base and the amount of CFC tax payable in a given tax year. The CFC records should be prepared no later than at the time of the submission of the CFC statement.
Failure to present to the tax authorities the CFC register and CFC records (the deadline is 7 days upon a tax authorities’ request) or keeping the CFC register and CFC records in a way that does not allow proper determination of the CFC income may result in the assessment of the CFC income by the tax authorities basing on the transaction from which the income should have been recorded.
In addition to the above consequences, a failure to submit the CFC statement and to transfer the CFC tax to relevant tax office may under certain conditions result in the taxpayer’s criminal fiscal liability.