Fiscal "Polish Order" just around the corner
The long-announced and much commented on so-called "Polish Order" regarding changes in tax regulations was submitted to the Parliament on 8 September. The government plans to work on this project at an express pace and plans to work on the draft this week. Unfortunately, this pace may suggest a very short period for any analyses or consultations. It is a great pity, as the regulations contained in this draft will significantly affect the burden on entrepreneurs and natural persons not conducting business activity.
According to the announcement, the changes would take effect beginning in 2022.
Below we present some of the key areas to be affected by the changes. We will, of course, monitor this issue for you and inform you about the final shape of the changes to be introduced (and due to their scale and scope, discuss them successively and more extensively).
The draft of “Polish Order”, which was submitted to the Parliament, provides for changes in terms of, among others:
- PIT and new rules for settling for health contribution
- lack of possibility to deduct health contribution from tax;
- Significant increase of health contribution (real economic burden)
- entrepreneurs "on a flat tax rate 19%" - 4,9%;
- employees, entrepreneurs taxed according to the tax scale - 9%;
- entrepreneurs taxed with a lump sum - 9% calculated on the basis (for taxpayers with annual revenues up to PLN 60 thousand the monthly basis of the health contribution will be 60% of the average salary, for revenues up to PLN 300 thousand 100% of the average salary, and for higher 180% of the average salary);
- entrepreneurs taxed with a tax card - 9% of the minimum wage:
- change in the deadline for settling insurance contributions - by the 20th of the month;
- changes in tax thresholds (for those who settle PIT according to the tax scale - 17% up to PLN 120,000 and 32% above this amount;
- change in the tax-free amount - up to PLN 30,000 (however - it does not apply to entrepreneurs taxed with a flat 19% PIT rate);
- additional degressive PIT relief - only for employees;
- change in the flat rate for IT specialists (reduction to 12%);
- changes in the taxation of "company" cars;
- income from the rental of apartments will be taxed as a lump sum (without the possibility to deduct tax-deductible costs, including depreciation and the tax-free amount);
- Extension of the scope of the so-called exit tax;
- introduction of a tax relief for returning to Poland.
- a new income tax (!) - announced as one that will affect only the largest corporations, while it will also apply to those companies that report a loss in their annual returns or whose share of income in revenue is 1% or less;
- expanding the list of expenses that will not be allowed as tax-deductible costs (including services from shareholders and management board members);
- definition of the place of management (which is to apply to companies registered outside of Poland, not conducting their actual business there);
- changes in the so-called "Estonian CIT" (including, e.g. removal of income limits and broadening the scope of the group to include limited partnerships).
- Changes that may affect PIT and CIT
- Changes in the scope of transfer pricing regulations;
- entry into force of changes in withholding tax rules - changes introduced two years ago and successively postponed by the legislator (in a slightly modified form);
- preferential taxation of holding companies (dividend exemptions, exemption of profits from the sale of shares in subsidiaries)
- changes concerning debt financing (impact of debt financing costs on tax result);
- changes regarding "private" buyout of leased vehicles (significant new burden);
- ban on depreciation of flats;
- new tax relief for robotization;
- changes in the application of the R&D and IP BOX relief (introduction of the possibility of simultaneous use of these two solutions);
- introduction of tax relief for innovative employees;
- introduction of tax relief for prototypes.
- VAT taxation of financial transactions/services;
- introduction of the possibility of joint accounting as a VAT group.
This shows that the list of changes is vast. We are watching the legislative process, hoping that the project will still evolve.
Author: Michał Krysik – tax law expert. Partner in ALLIN TAX Sp. z o.o. - The partner cooperating with the Leśnodorski Ślusarek and Partners.
Within the scope of his practice he participates in special projects for companies from various branches, he analyzes tax consequences of restructuring transactions, drafts contracts, and assesses their tax consequences. He also provides ongoing tax advice to the clients of LSW.