Changes in Polish corporate income tax 2020. On 23rd of September our experts: Marcin Jaworski and Michał Jagielski summarized biggest corporate income tax challenges and opportunities for 2020. More info: https://pwc.to/2lkTbOj

1. Changes in Polish
corporate income tax
2020
Presentation by Marcin Jaworski and Michał Jagielski
September 2019

2. PwC
1. Bad debts - increase/decrease of the taxable base
2. Withholding Tax and Notional Interest Deduction (full entry into
force)
3. Implementation of the Anti-Tax Avoidance Directive (ATAD 2)
4. Planned changes in Advance Pricing Agreements (APAs)
5. Cooperation agreements with tax authorities
6. VAT whitelist vs tax deductible costs
Agenda
23 September 2019Changes in Polish corporate income tax 2020
2

3. PwC
Which of the tax
provisions introduced in
recent years would you
consider to have
the greatest impact on
your business:
(a) art. 15e - intangible
services cost limitation
(b) changes in withholding
tax
(c) changes in transfer
pricing rules

4. Bad debts -
increase/decrease of
the taxable base

5. PwC
by the value of due
receivables, if
monetary payment
has not been paid or
sold
Taxpayer may reduce /
must increase the tax
base, if the liability has
not been settled / sold by
the date of tax return
submission
If the liability is settled in
the following tax period,
the taxpayers are obliged
to increase / reduce
the tax base in the
subsequent period.
Bad debts - increase/decrease of the taxable base
23 September 2019Changes in Polish corporate income tax 2020
5
Monetary payment - remuneration for the supply
of goods or services in a commercial transaction
the tax base:
may be
reduced
by the value of
unsettled monetary
payment, which was
recognized as tax
deductible cost
is increased
after 90 days from the invoice due date as specified in
the invoice / contract, the taxpayer may / should reduce
/ increase the tax base
The reduction / increase should be shown in the tax
return submitted for the tax year as well as monthly
advances.

6. Withholding Tax and
Notional Interest
Deduction (full entry
into force)

7. PwC
Withholding tax in Poland – a new mechanism
A completely new mechanism of settlement of WHT in relation to payments exceeding PLN 2 million
per annum for each taxpayer is to be introduced.
Payments not
exceeding PLN 2
million per
annum –
additional
documentation
• Tax remitter is entitled to apply reduced WHT rate or
WHT exemption in accordance with previous WHT
provisions.
• Additional conditio of due care
Payments
exceeding PLN 2
million per
annum –
certification
proces
• The tax remitter is obliged to withhold domestic WHT
subject to two exemptions (certification process and
opinion).
7
New definition of beneficial owner.
23 September 2019Changes in Polish corporate income tax 2020

8. PwC
Withholding tax in Poland – payment > 2MLN
Formal opinion (for Directive based exemptions only)
• Taxpayer or tax remitter which incurred the economic cost of WHT should be able to apply to the tax authorities for an
opinion confirming that tax may not be withheld based on the Parent-Subsidiary Directive or Interest/Royalties Directive
implemented to the CIT Law.
• The opinion shall be issued within 6 months from date of application and be valid for 36 months. Application for the
opinion shall be subject to fee of PLN 2,000.
• Tax application for the opinion might be rejected if:
o the taxpayer does not meet the requirements stipulated in the CIT Law;
o anti-avoidance provisions may be applicable;
o documents attached to the application are not in accordance with the factual circumstances;
o the taxpayer does not conduct a business activity in the country of his tax residence.
Certification process
• New mechanism will allow tax remitters not to withhold tax in relation to payments exceeding PLN 2 million per annum, if
the remitter submits a statement confirming that:
1. it possesses all documents required by tax regulations necessary for applying reduced WHT rate or exemption from
WHT;
2. it is not aware of any circumstances which speak against granting tax exemption and such verification was done with
due diligence.
• The statement should be signed by the head of the tax remitter entity under penalty liability.
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23 September 2019Changes in Polish corporate income tax 2020

9. PwC
Withholding tax in Poland – payment > 2MLN
Statement of the remitter and their personal liability
false statement tax audit additional tax liability
10% of a tax base of the payment for
which the tax was not collected or when a
reduced rate was applied
20% if a tax base is higher than PLN
15 MLN – to the surplus of that amount.
Additionally, the authority will apply the 20%
rate when it has not been 10 years since the
decision about additional tax obligation was
delivered or if the transfer pricing
documentation has not been submitted
30% if a tax base is higher than PLN
15 MLN and it has not been 10 years since
the decision about additional tax obligation
was delivered or if the transfer pricing
documentation has not been submitted (two
conditions have to be met jointly)
=
9
23 September 2019Changes in Polish corporate income tax 2020

10. PwC
Withholding tax in Poland – payment > 2MLN
WHT refund
Entity eligible for refund
Taxpayer / remitter shall have the right to claim for a WHT refund.
Form of the claim
Refund application will need to be submitted by means of electronic communication.
At the moment, a template of application form is not yet available.
Procedure
Refund procedure should be completed within 6 months.
Before tax refund, tax authorities will verify, among others purpose of payment and so-called the
taxpayer's business substance (the existence of "empty" companies will make it impossible to refund
the tax). The authorities will refuse to return funds if the payment is related to the so-called tax planning.
In case there are doubts regarding fulfilment of conditions for a refund, a tax audit of a taxpayer may be
initiated.
10
23 September 2019Changes in Polish corporate income tax 2020

11. PwC
Withholding tax in Poland – payment > 2MLN
WHT refund (cont’d)
Taxpayer / remitter shall have the right to claim for a WHT refund. WHT refund procedure
will be similar to current WHT claims, requiring:
1. extensive analysis of source documents;
2. collection of additional documentation, including:
11
Strategic
business
planning
taxpayer’s
statement on
fulfilment of the
conditions for
exemption
statement of the
beneficial
ownership status
relevant
agreements
bank transfers
confirming
payments
subject to WHT
declaration as
to the
truthfulness of
the required
documents
certificate of tax
residence
Documents prepared
by an applicant
Documents prepared
by a taxpayer
23 September 2019Changes in Polish corporate income tax 2020
statement
confirming real
economic
activity of the
taxpayer in the
country of its
residence

12. PwC
WHT Navigator - unique PwC tool helping in
WHT procedures
WHT Navigator:
The WHT Navigator is intended as a tool that may be shared by the tax remitter with the taxpayer, to
be populated with relevant data, information and source documents.
Analysis
of business
substance
of holding
companies
Certification
of investment
funds
Tax litigation
and support
during
tax audits
Review of
significant
business
activity for
the purpose
of CFC
provision
Review of
business
justification
of cross-border
transactions
12
23 September 2019Changes in Polish corporate income tax 2020

13. PwC
Withholding tax in Poland – small GAAR
Small GAAR which used to be applicable only to dividend payments will used by the tax authorities to all WHT
payments, i.e. to interest and royalty payments.
The applicability of WHT exemption, resulting from the EU Directives, will take place provided small GAAR is not
used. Under the small GAAR, Poland shall deny the benefits of the Parent-Subsidiary Directive and Interest/
Royalties Directive, to a legal transaction or series of legal transactions which, having been put into place for the
main purpose or one of the main purposes of obtaining a tax advantage, are not genuine having regard to all
relevant facts and circumstances.
The small GAAR may apply if the structure within which the payment is made:
- was mainly aimed at achieving tax benefits;
- is not supported by a proper business reasons;
- does not reflect economic reality.
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23 September 2019Changes in Polish corporate income tax 2020

14. PwC
National interest deduction
As of 1 January 2020 entities shall be allowed to recognize
certain amounts (calculated as interest based on the market
level)
tax deductible costs related to:
• retained profits, and
• contribution to equity.
Contribution
to equity
Retained
profits
Multiply by NBP
reference rate*
plus 1%
Cost base
Additional deduction
cannot exceed
PLN 250k per year
Deduction applicable if
equity not returned
within 3 years
14
*currently 1,5%
23 September 2019Changes in Polish corporate income tax 2020

15. Implementation of the
Anti-Tax Avoidance
Directive (ATAD 2)

16. PwC
ATAD I & II
Status Domestic Implementation Process - EU-28 Member
States
EU Country Measure taken/planned
Poland Most of regulations relating to ATAD’s implementation in Poland, including CFC regulations, thin capitalization rules and GAAR rules are
already in place. They may be considered as compliant with the Directives.
As of 1 January 2019 in particular the following ATAD related rules were introduced or amended in the domestic CIT regulations:
• Exit tax - both for corporate entities and individuals changing residency or moving assets abroad (unrealised gain will be taxed at 19%,
possibility to pay due exit tax in 5 years installments);
• CFC regulations were amended in a way that:
✓ CFC entity will also entail trusts and foundations,
✓ the minimum (30-day) period for which shares in the company's capital should be held, for the entity to be characterized as CFC was
deleted,
✓ the tax base will consist of the company's income less the dividends received by the taxpayer from the company and income from the
paid disposal of CFC shares by the taxpayer,
• The definition of CFC was also changed. As of 2019 provisions refer to a foreign controlled entity (instead of a foreign controlled company).
In addition, the CFC's income may be taxed with a solidarity tax of 4% (additional tax imposed on individuals).
• GAAR regulations were changed – in particular there is an additional tax liability applied in case tax authorities issue a decision within GAAR
regulations;
• GAAR also applies to domestic exemption for interest and royalties (in case such interest / royalties are paid within an artificial structure a
taxpayer will be denied a possibility to apply tax exemption from WHT in Poland).
16
23 September 2019Changes in Polish corporate income tax 2020

17. PwC
ATAD I & II
Status Domestic Implementation Process - EU-28 Member
States
EU Country Measure taken/planned
Poland Poland’s Ministry of Finance published, on 23 August 2019, a draft bill setting forth several provisions to implement certain anti-hybrid
measures.
Hybrid mismatches may occur when jurisdictions have different regulations in the tax qualification of sources of income or types of entities. It
results. It results in double deduction of payments as tax deductible costs or in deduction of costs without inclusion as taxable revenues on the
other side of the transaction.
The following hybrid mismatch arrangements are addressed by ATAD 2:
• Hybrid entity mismatches,
• Hybrid financial instrument mismatches,
• Hybrid transfers,
• Hybrid permanent establishment,
• Imported mismatches,
• Tax residency mismatches.
The draft is in legislative process. If approved, the effective date of the new provisions should be 1 January 2020.
17
23 September 2019Changes in Polish corporate income tax 2020

18. Planned changes in
Advance Pricing
Agreements (APAs)

19. PwC
Planned changes in Advance Pricing Agreements (APAs)
23 September 2019Changes in Polish corporate income tax 2020
19
An Advance Pricing Agreement (APA) is a formal decision based on which the transfer
price of a controlled transaction is considered to have been agreed on terms that would
have been agreed on by unrelated parties
✓ According to the project, an investor intending to establish an affiliate in Poland may
also apply for APA
✓ The Head of the National Fiscal Administration verifies compliance with APA
Impact on art. 15e
Taxpayers are obliged to exclude from tax-deductible costs of certain costs incurred
directly or indirectly for related entities.
Now
The limitation does not apply for remuneration for transactions covered with APA –
applicable also to the tax year the APA decision was issued and the previous tax year
Planned changes
The limitation does not apply for remuneration for transactions covered with APA
The bill project is currently being
proceeded by Public Finances
Committee.
The procedure for issuing should be
completed not later than within:
― unilateral APA - 6 months,
― bilateral APA - 12 months,
― multilateral APA - 18 months.

20. Cooperative
compliance

21. PwC
Cooperation agreements with tax authorities
23 September 2019Changes in Polish corporate income tax 2020
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Taxpayer may terminate the agreement
at any time
An agreement may be concluded with a
taxpayer who has received a positive
opinion from the preliminary audit
The agreement shall be concluded in
writing for an indefinite time period
Concluded on request on taxes within
the jurisdiction of the National Fiscal
Administration
The Head of the National Fiscal
Administration keeps register of the
taxpayers who entered into an
agreement
An application for a contract may be
filed by a taxpayer whose income in the
previous tax year exceeded EUR 50 m
The bill project is currently being proceeded by Public Finances Committee.

22. PwC
Cooperation agreements with tax authorities
23 September 2019
22
Taxpayer
Is obliged to:
• perform tax obligations voluntarily and properly,
• have an effective and adequate internal tax
procedures (internal tax supervision framework),
• report to the Head of the National Fiscal
Administration without request relevant tax issues
which may reasonably become a source of
dispute with tax authority, or information that may
affect the taxpayer obtaining tax benefits in line
with the materiality thresholds as set out in the
agreement.
Head of the National Fiscal Administration
within the agreement:
• adjusts frequency and form of verification the
taxpayer's performance of tax obligations to the
effectiveness and adequacy of the internal tax audit
procedures and previous cooperation with tax
authorities,
• conducts tax audit,
• approves certain tax verification activities conducted
by tax authorities.
The bill project is currently being proceeded by Public Finances Committee.

23. PwC
Does your group
participate in cooperative
compliance programs in
other jurisdictions?
Will it be willing to enter
into cooperation
agreement in Poland?
(a) Yes – the group
participates in cooperative
compliance and potentially
will be willing to enter into
cooperation agreement in
Poland
(b) Maybe - the group does
not participate in
cooperative compliance,
but plans to
(c) No – the group does not
participate in cooperative
compliance and is not
willing to participate

24. VAT whitelist vs tax
deductible costs

25. PwC
23 September 2019Changes in Polish corporate income tax 2020
25
The white list
The Head of the National Revenue
Administration maintains the list
containing data on entities registered
as the VAT taxpayers (the so-called
“whitelist”). The white list includes
information e.g. on taxpayers bank
accounts numbers.
VAT whitelist vs tax deductible costs
Tax deductibility limitation
Expenses paid via transfer to bank
account which is not included in the
list, cannot be treated as tax
deductible cost. Obligation to settle
your expenses with use of bank
accounts mentioned in the white list
is applicable to transactions
exceeding value of PLN 15 000.
Notification procedure
Above sanctions will not apply if the
taxpayer notifies the head of the
tax office about the payment made
to an account other than the one
included in the list - within three
days from the date of the payment
being ordered.
Enters into force 1 January 2020

26. pwc.com
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Michał Jagielski
Senior manager
+48 519 506 698
michal.jagielski@pwc.com
Marcin Jaworski
Senior manager
+48 502 184 838
marcin.jaworski@pwc.com