Tax news for financial institutions
Summary of key tax developments for financial institutions in Poland.
The Polish government and the Minister of Finance have announced further details of the Polish "New Deal". The "New Deal" is a programme of economic and social reforms promoted by the Polish ruling party (Prawo i Sprawiedliwość) - please refer also to Deloitte Poland Tax News for Financial Institutions | May 2021.
The changes proposed to the Polish tax law are aimed to attract foreign strategic investors to Poland. This would give Poland a competitive advantage in the region. The following tax incentives were announced on June 14, 2021:
- a single point of contact (Investor Desk) located in the Polish Ministry of Finance which will coordinate and handle all requests and inquiries from strategic clients (both domestic or foreign),
- a single tax ruling issued to a strategic taxpayer which will cover all tax consequences of a planned investment (e.g. for the purposes of CIT, VAT, local taxes, excise & duty, transfer pricing and abuse of tax regulations). Such a tax ruling will be called "Interpretation 590", because 590 is the barcode prefix for Poland. It will be valid for up to 5 years;
- relaxation of the requirements concerning forming and maintaining a tax capital group ("PGK") for CIT purposes, and, after the introduction of VAT grouping, also for VAT purposes;
- introduction of a significant reduction (95%) in the taxation of dividends paid to entities seated in non-EU / non-EEA countries or Swiss companies (i.e. companies that cannot benefit from the EU Parent Subsidiary Directive 2011/96/EU). The holding period will be only one year (so a year shorter than currently stipulated for participation exemption);
- CIT exemption for capital gains generated by a holding company on sale of shares (for the moment we do not know the details of this participation exemption);
- option to waive the VAT exemption for financial services (excluding insurance) provided to business clients (B2B). In consequence, any financial institution could decide to charge standard output VAT on such services;
- enhancing the current tax reliefs (Research & Development tax relief: e.g. increase from 100% to 200% of the deduction of gross salary; Innovation Box) and introduction of new ones (e.g. a tax relief for robotization, trial production or Initial Public Offer).
As announced, some of the changes are planned to come into force starting from 2022.
Polish taxpayers are waiting for drafts of the relevant laws.
On April 30, 2021 the Head of the National Revenue Administration (Szef Krajowej Administracji Skarbowej) issued a special clearance opinion (no. DKP3.8011.28.2020) protecting the taxpayer against penalty for infringement of the law (general anti-abusive rule, "GAAR").
A Polish bank wants to offer a product that combines a guarantee with a loan, namely a guarantee that will convert into a loan in case of default. The GAAR could be theoretically applicable to such a product, because the CIT treatment of loan receivables is more favourable than the treatment of guarantee receivables (e.g. impairment on guarantees is not tax deductible). Considering the above, the bank asked for an official confirmation that no tax abuse could be identified in this situation.
The Polish tax authority has confirmed that the General Anti-Abuse Rule does not apply to the proposed product, because there are genuine business reasons for introducing the product (not tax driven) and because the arrangement is not artificial. As a consequence, the GAAR cannot affect the tax consequences of the product.
This is the second clearance opinion issued to a Polish bank, and the first one to deal with a banking product in the context of an abusive tax scheme.
There is a law in Poland that changes the withholding tax rules for payments made to a foreign tax resident in excess of (in total, per year) PLN 2,000,000 (ca. EUR 450,000). The said law was introduced in 2019, but in practice, its key provisions have been successively suspended (each time for 6 months) by virtue of the regulations issued by the Polish Minister of Finance. Currently, the law was scheduled to take effect on June 30, 2021, but the Minister has just announced further extension of the suspension, this time until the end of 2021.
If the law becomes effective, 19% or 20% withholding tax will be collected practically on all payments over the PLN 2M / EUR 0.5M threshold. Then a taxpayer should apply for a refund of withholding tax directly to the Polish tax office. Thus, the withholding tax relief will be replaced by a pay and refund mechanism.
The Ministry of Finance has also announced that a new withholding tax regime in Poland is currently under development. It is therefore difficult to predict what the final shape of the Polish WHT system will be.