1. Electronic RET returns from July 1?

2. Sale of shares is exempted from VAT

3. Only certain expenses strictly related to construction of a wind farm can be included in the tax deductible costs

1. Electronic RET returns from July 1?

On April 8, on the website of the Government Legislation Center, the Ministry of Finance published draft regulations, thanks to which from July 1, 2019 it will be possible to submit RET returns in electronic form.

According to the proposed solutions, returns can be submitted via ePUAP platform or data transmission systems of local government units (if such systems are implemented by municipalities). Additionally, RET returns have to be provided with a qualified electronic signature, a personal signature or a trusted signature.

From July 1, 2019 the Ministry of Finance also plans to introduce uniform RET returns which will apply to all municipalities throughout Poland. Therefore, instead of different forms in each municipality, taxpayers possessing real estate in several municipalities will submit the same form in all municipalities.

Although the changes will come into force on July 1, most taxpayers will send new electronic RET returns  to the local tax authorities in 2020. According to the interim provisions if RET obligation arose before July 1, 2019, RET returns are submitted on the basis of the previous regulations.

2. Sale of shares is exempt from VAT

This is how the Director of the National Fiscal Information ruled in the tax ruling (file number 0114-KDIP1-1.4012.688.2018.2.RR) issued for a company which belongs to the group operating in the field of energy production from conventional and renewable sources as well as in the field of distribution and trading of electricity.

Within the group the company conducts holding activities, i.e. operates as a center for other companies in the group (e.g. concludes contracts for the provision of consulting services, accounting and payroll services, risk management services, administrative services, controlling services) and runs financial activity (provides sureties, guarantees and financing, among others in the form of loans). The services which the company renders as a center for other companies are subject to VAT at 23%, whereas financial services are exempted from VAT.

In 2018 the company sold 50% of shares in two subsidiaries. The company also plans to sell 50% of shares in another subsidiary. The purpose of these transactions is to acquire an investor for the substantive support of offshore projects related to offshore wind farms.

Assessing the company’s situation the Director of the National Fiscal Information took into account two factors: 1) the services which the company renders as a center are dedicated to three subsidiaries mentioned above, 2) the company participates in the management of these three subsidiaries. In the light of the Polish VAT Act services, the subject of which are shares in companies, are exempted from VAT. On this basis the tax authority concluded that the sale of shares made and planned by the company is exempted from VAT.

3. Only certain expenses strictly related to construction of a wind farm can be included in the tax deductible costs

In 2013 the company established to build a wind farm applied for a tax ruling in order to receive confirmation that all expenses related to a construction of a wind farm can be considered as the tax deductible costs. In the tax ruling issued in 2014 The Director of the Tax Chamber in Warsaw presented different standpoint. Unfortunately the proceedings in this case has not been finished yet.

For the construction of a wind farm the company took a long-term loan. In order to meet the bank’s requirements, the company had to make its own contribution, prepare legal and formal analyzes of the project, hire a technical adviser approved by the bank. Therefore the company had to pay for consultancy (financial, legal, tax, banking, accounting), notarial services, translator services (members for the board were not Poles), bank’s remuneration (interest, commitment fee), etc.

The company argued that all expenses should increase the initial value of the wind farm, because they are necessary for the investment process. The Director of the Tax Chamber in Warsaw agreed only on certain expenses strictly related to the construction of the farm, such as expenses for the work of a technical advisor, the commission of the prepayment paid before the loan was opened and interest on it (until the day the farm was put into use). However, the tax authority did not classify the cost of other types of consultancy, notary services, translator, payment for engagement and payments for bank payment guarantees as tax deductible costs. Therefore the company submitted a complaint against the tax ruling.

In the first judgment the Voivodship Administrative Court in Warsaw stood on the company’s side, considering that the investment expenditure means all costs incurred in order to implement the investment. Unfortunately opposite standpoint was presented by the Supreme Administrative Court, which stated that the tax ruling issued by the Director of the Tax Chamber in Warsaw was correct.

The case came back to the Voivodship Administrative Court in Warsaw which overruled the tax ruling even though it was bound by the Supreme Administrative Court’s judgment. In November 2018 the Voivodship Administrative Court in Warsaw issued the third judgment in the same case (file number III SA/Wa 487/18), this time in auto-correction mode. The judgment is in line with the standpoint of the Supreme Administrative Court, unfortunately it is not legally valid, which means that the proceedings has not been finished yet.