Polish Ministry of Finance: another WHT postponement and “Estonian CIT”

During the event organized on 4 March by one of the chambers of commerce, the Deputy Minister of Finance raised that the Ministry of Finance (MF) plans to focus its work in the nearest future on:

  • another suspension of the obligatory withholding tax remittance for transactions exceeding PLN 2 million (until the end of 2020), as well as
  • introduction of so-called “Estonian CIT”.

Postponement of WHT regulations

The Ministry of Finance considers issuing a regulation on postponing obligatory WHT remittance for payments exceeding PLN 2 million in a given year. The restrictive WHT regime is about to come into force as of 1 January 2021.

The business will certainly applaud this change – starting from 2019 we observe growing resentment of foreign investors with respect to investing in Poland. They react negatively, especially to new WHT regulations.

Please note that the restrictive definition of the beneficial owner and the requirement to exercise due diligence when applying WHT exemption or reduced WHT rate are in force already as of 1 January 2019 – these regulations should not be ignored.

Estonian CIT

As announced, the Ministry of Finance is to publish in April 2020 a bill introducing the so-called Estonian CIT in Poland. What does this mean?

Estonia was the first country to apply this solution (hence the name). This model is based on shifting the tax collection moment – a collection of income tax on the company’s profit achieved in a given year takes place not earlier than upon its distribution. In other words, income is not taxed as long as it “stays” in the company – the aim is to encourage reinvestment of the company’s profits.

The new method of taxation is to support the smallest companies, i.e. micro- and small-entrepreneurs (and will not rather cover medium-sized ones). It also implies the maximum simplification of their tax settlements and the facilitation of contact with the tax administration.

The Ministry of Finance is also to prepare facilities for self-employed PIT payers who will not be covered by the Estonian model. The most important is a radical increase – from EUR 250k up to EUR 2M in revenues – of a threshold below which a flat-rate may be applied.

Other mentioned topics regarding the future direction of the tax legislation in Poland:

  • continuation of work on digital tax,
  • plans to implement by 2022 mandatory electronic B2B invoicing, probably based on the solution already introduced in Italy,
  • amendments to the MDR regime aiming at making it more friendly to taxpayers (fingers crossed!).

At the same time, it has been also noted that the Ministry remains open to cooperation with taxpayers in the introduction process of planned changes.

If you would like to discuss the details of the upcoming changes, please contact us:

Łukasz Bączyk
Head of Tax

Jarosław Szajkowski
Tax Manager – Tax Adviser

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