Changes in CIT Act

A proposition of amended CIT regulations was presented by Ministry of Finance. As of 1 January 2023, the planned changes are about to come into force.

Withdrawal of “hidden dividend” regulations

One of the most important changes is withdrawal of hidden dividend regulations which was to be introduced within Polish Deal 1.0. Hidden dividend means settlement with related party which may be perceived as not arm’s length. Costs treated as hidden dividend are non-deductible. Interpretation problems and potential negative impact of these new stipulations caused full withdrawal of the tax administration from introduction of “hidden dividend” provisions.

Changes in minimum tax

The draft act postpones the moment when minimum tax comes into force until 1 January 2023. Taxpayers will not be obligated to pay minimum tax for the 2022 tax year.

Minimum tax applies to companies and tax capital groups which incur losses or have low profitability index (ratio of income to revenue). Profitability index causing the tax obligation was raised from 1% to 2%. Moreover, small taxpayers and entities under liquidation have been exempted from the tax.

Other changes

The draft act proposes changes also in:

  • tax on pass-through income: clarification of definition of related parties, companies having HQ or place of management in Poland and the conditions of being subject to tax on pass-through income;
  • withholding tax (WHT): extension of subjective exemption in WHT and extension of taxpayer’s declaration validity period till the end of the tax year;
  • lump-sum tax on corporate income (so-called Estonian CIT): postponement to the end of a third month of subsequent tax year the date of payment of lump-sum tax on income from distributed profit and income from profit dedicated to cover losses;
  • Controlled Foreign Company: the draft act plans to eliminate double taxation in the case of dividend payment between CFCs remaining in the same holding structure. The draft clarifies a definition of controlled company and details a condition of high profitability applicable in the case of sale of assets during the tax year;
  • Polish holding company:  change of a definition of Polish holding company – Polish holding company may be established in the form of joint-stock company;
  • procedure of tax repayment of tax on revenues on commercial buildings: the draft act proposes simplification of the procedure of the tax repaymentif there is no doubt about the rationale for the refund;
  • transfer pricing obligation in the transactions with companies located in tax havens: the draft assumes raising documentary thresholds, eliminating presumption of beneficial owner’s residence in tax haven and simplification in beneficial owner’s identity for preparation of transfer price documentation.

We will keep you updated on the progress of implementing this draft acts. You can find the draft act here (only in Polish).

Should you have any questions, please do not hesitate to get in touch with our experts:

Łukasz Bączyk
Head of Tax

Paweł Jóźwik
Senior Manager

Karina Krzemińska
Junior Tax Consultant

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