accounting outsourcing Poland

The limit of shares or stocks from which the duty to prepare tax documentation arises was increased from 5% to 25%. From 1st January 2017, the duty to prepare tax documentation applies to the following  entities:

1) which run a non-agricultural business or special agricultural production, who/which in the fiscal year and in the year preceding the tax year were running accounting ledgers:

1. a) who/which in the tax year had transactions with related entities of a significant

impact on the amount of their income (loss), or

1. b) who/which in the tax year recognized in the accounting ledgers other events, whose

terms were set out (or imposed) with related entities, of a significant impact on the

amount of their income (loss),

– whose revenues or costs, as understood by the provisions on accounting, established based on the accounting ledgers run exceeded in the year preceding the tax year, the equivalent of Euro 2,000,000 (or else in the case of tax payers starting up non-agricultural business or special agricultural production – from the month following that when  revenues or costs, as understood by the provisions on accounting, established based on the accounting ledgers run exceeded the equivalent of Euro 2,000,000 or,

2) which pay, directly or indirectly, the amounts due to an entity, having its place of residence, registered office or management board in the territory or in the country that applies harmful tax competition, arising from transactions or other events recognized in the accounting ledgers if the total amount (or its equivalent) of the contract or the total amount due in the fiscal year actually paid in the tax year exceeds the equivalent of EURO 20,000, or

3) which conclude with an  entity being resident, having  registered office or its management board in the territory or in the country that applies harmful tax competition:

1. a) a contract of partnership not being a legal person, if the total value of the contributions brought by shareholders exceeds the equivalent of EUR 20,000 or
2. b) a joint venture contract or another contract of a similar nature, in which the value of the project to be jointly implemented, set out in the contract or else when lacking in the contract but anticipated at the moment the contract is concluded, exceeds the equivalent of Euro 20,000.

The tax documentation is to be made for a given tax year, in the deadline for drawing up financial statements for a given year. If in a given year, the duty to draw up the documentation arises, it passes to the next year, regardless of the value of turnover in the other year. The taxpayer will declare whether they were under the obligation of drawing up tax documents, and whether such documentation was drawn up together with the annual CIT / PIT returns.

 

The tax documentation shall contain:

 

1) a description of the transactions or other events with the particulars of the parties engaged in the transactions, the assets involved, the risks borne,

 

2) a description of such  taxpayer’s financial particulars to make a settlement comparison possible with the data, arising from the approved financial statements, if the obligation to draw them up results from the accounting regulations, binding the taxpayer or the company;

 

3) the information on the taxpayer, including a description of:

1. a) their organizational and management structure,
2. b) the object and scope of their business,
3. c) economic strategy undertaken, the transfers between related parties of economically important functions, assets and risks, affecting the taxpayer’s income (loss) included which were carried out in the fiscal year or in the year preceding the fiscal year,
4. d) the competitive environment;

 

4) documents, in particular:

1. a) contracts, agreements concluded between related parties or other documents of transactions or other events referred to in Article 25a subparagraph 1 of PIT Act or Art. 9a subparagraph 1 of CIT Act, a contract of partnership not being a legal person, a joint venture contract or similar ones, that document the rules for granting rights to shareholders (the contracting parties) to participate in the profits or in losses,
2. b) understandings on income tax concluded with tax offices of countries other than the Republic of Poland related to transactions or other events referred to in subparagraph 1, in particular, earlier price understandings. Additionally, in the event of large taxpayers ( with turnover in excess of the equivalent of EURO 10,000,000 and 20,000,000) the provisions provide for additional data. These entities will have to draw up and file together with the tax return an annual simplified report on transactions with related parties or other events that occur between related parties, or with reference with which the amounts shall be paid directly or indirectly to a person having its place of residence, seat or management board in the territory or in a country which applies harmful tax competition.

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As on 1^st January, 2017, the catalogue of eligible costs will be extended by costs of obtaining and maintaining a patent, utility model right, the right from the registration of industrial design, incurred by the taxpayer being a micro-entrepreneur, small or medium-sized enterprise set out in added Article 18d subparagraph 2 point 5 of the CIT Act as understood by the provisions on the freedom of establishment. In addition, these entities will be able to reduce the tax base in the annual calculation by higher limits of expenses – 50% of eligible costs. For large enterprises, these limits will amount to 50% of  costs in the case of labour costs of those employed  in order to carry out research and development work, 30% in the case of other eligible costs. These expenses can be settled over the subsequent 6 years. In the case of start-ups  which do not report income or have too small an income to avail themselves fully of the tax relief for costs of research and development incurred, a solution was introduced to grant reimbursement of eligible costs, in the part that was not covered by the tax relief in a given year due to the lack of taxable income or excessively low income. This solution means the grant of reimbursement of a part of eligible costs. The decision to choose this solution will belong to the taxpayers.

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In both the tax laws, a catalogue of incomes gained in the territory of Poland was introduced. The range of this catalogue does not differ from that which was in force in 2016. The basic change is the recognition that the income is gained in the territory of the Republic of Poland from settled receivables, those made available, paid out or withheld, by individuals, legal persons or entities without legal personality, having a place of residence, registered office or management board in the territory of the Republic of Poland, regardless of the place where  the contract was concluded and the performed. This means that the contractor does not have to provide the service physically in Poland to have it taxed in Poland. The remuneration for services referred to in Art. 29 of the PIT Act and art. 21 of the CIT Act  is subject to tax in Poland (personally done artistic, literary, scenic, scientific, coaching, educational, journalist activities, incomes of management board, supervisory board members, revenues from management contracts, contracts for company management, licences, property rights, know-how,  consulting, accounting, market research, legal services, advertising, management and control, data processing, recruitment of personnel, provision of guarantees and similar services).

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In both the tax laws, the tax revenue for the entity which brings contribution in kind to the retained earnings capital of a company is the value of the contribution, and not as before, the nominal value of shares/stocks taken over in exchange for the contribution in kind. This means the end of the tax optimization related to bringing  intangible and legal assets or other assets to the retained earnings capital in Poland.

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In both income tax laws, a ban on offsetting as tax expenses, the cost of the acquisition of goods, services and fixed assets worth more than 15,000 PLN, which were paid for in cash, was introduced. The compensation of mutual obligations is not treated as a payment in cash. This provision applies to transactions allocated into 2017 tax expenses  (does not apply to transactions paid in 2017 but allocated into 2016 tax expenses).

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Payers of corporate income tax, whose value of sales revenue, along with the amount of output VAT in the previous fiscal year, did not exceed the equivalent of PLN 1.2 million and taxpayers, starting business will pay income tax at the rate of 15%.

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