Regulation of the Ministry of Finance on the application of amended provisions on withholding tax.
2. The wider scope of the general clause against tax avoidance (GAAR)
3. Reduction of deadline for crediting the debts to be irrecoverable – changes in the scope of relief for bad debts
4. Innovation Box – a new tax incentive for entrepreneurs
5. New rules for taxation of car use
6. Amounts paid because of joint and several liability for counterparty liabilities may be treated as tax deductible costs.

1. Regulation of the Ministry of Finance on the application of amended provisions on withholding tax.

One of the most important amendments to corporate income tax is the change of mechanism of WHT settlement (exclusion of application an exemption at source in favor of exemption post factum on request). Obligatory collection of tax shall be applied as a rule in situation when the amount of payments made in favor of one taxpayer exceeds in tax year amount of PLN 2.000.000.

Regulation of 31st December 2018 excludes to the 1st July 2019 application of obligatory collection WHT relating to appropriate payments of receivables after fulfillment conditions stipulated in regulation (wherein limit of 2.000.000 PLN itself will be calculated including payments made starting from 1st January 2019). Other provisions, regarding i.e. acting with due diligence within verification of foreign contractor or new definition of beneficial owner are applicable since 1st January 2019.

2. The wider scope of the general clause against tax avoidance (GAAR)

General clause against tax avoidance is valid in Poland since July 2016. At the beginning of the year, the amended provisions of Tax Ordinance Act on the scope of the clause, resulting from the implementation of the EU Anti-Optimization Directive (ATAD) came into force.

Under the new wording of the provisions, the anti-avoidance clause will be applied in a situation where the main or one of the main objectives of the act is to obtain a tax advantage contrary to the matter or the purpose of tax act. The clause in the previous wording of the act was applicable only when the actions were performed “primarily to obtain a tax advantage”.

The legislator also decided to abolish the lower threshold determining the amount of tax benefits. Until now, the clause was not applicable if the tax advantage or the sum of tax benefits achieved by the entity did not exceed PLN 100,000 in the settlement period.

3. Reduction of deadline for crediting the debts to be irrecoverable – changes in the scope of relief for bad debts

The institution of relief for bad debts consist in right of the creditor to correction of the tax base and VAT due for the domestic supply of goods or services in, in case it will make the receivables resulting from appropriate invoice or contract irrecoverable. So far, the receivable has been deemed irrecoverable after 150 days from the date of expiry of the payment deadline specified in the contract or invoice.

At present, a VAT taxpayer whose contractor is behind with payment can correct the output tax after 90 days from the date of payment. The shortened deadline will also apply to the correction on the part of the debtor.

This change allows entrepreneurs to take advantage of the relief for bad debts more quickly. In other words, creditors will be entitled to an earlier reduction of output VAT, whereas debtors will be forced to adjust the deducted input VAT earlier.

4. Innovation Box – a new tax incentive for entrepreneurs

From 1st January, a new tax solution applies: preferential taxation of income from the commercialization of intellectual property rights (so-called IP BOX, Innovation Box).

The relief may be applied by taxpayers who receive income from qualified intellectual property rights (among others from patents, protection rights for a utility model, rights from industrial design registration), created, developed or improved by the taxpayer as a result of his research and development.

The income described above achieved by the taxpayer will be taxable at a preferential tax rate of 5%. The tax base is the sum of eligible income from qualified intellectual property rights earned in the tax year. It is worth noting that using the Innovation Box does not exclude the simultaneous application of R & D relief.

5. New rules for taxation of car use

Along with the new year, changes in the rules of taxing the use of passenger cars in the company came into force.

The legislator decided to increase the limit of the value of a passenger car up to PLN 150,000, to which it is possible to fully deduct depreciation charges for the consumption of a passenger car.

The rules for qualifying as tax deductible costs expenditures related to the use of these passenger cars for business purposes that have not been included in the fixed assets register have also been changed. In case of such expenditures, taxpayers may account for 20% of expenses incurred to the costs of obtaining revenues.

Expenses incurred in the use of the car may constitute a tax deductible cost in 100% for cars used exclusively for business operations, wherein the taxpayer will be obliged to keep an appropriate record. In other cases (lack of required record, use of car for mixed purposes) taxpayers will include only 75% of expenses related to car use to the tax deductible costs.

6. Amounts paid because of joint and several liability for counterparty liabilities may be treated as tax deductible costs.

This was the opinion of the Voivodship Administrative Court in Gliwice in the judgment of 28th November 2018 (I SA/Gl 1005/18). The case concerned an investor who, in order to produce a fixed asset, concluded a construction contract with the general contractor. In the contract, the investor agreed to use the services of subcontractors by the general contractor. Due to the failure of the general contractor to pay subcontractors’ remuneration, the investor – as jointly and severally liable with the general contractor – performed appropriate payments to subcontractors. In the investors opinion total amount of remuneration paid by him to subcontractors could be classified as tax-deductible as they are related to his business.

The tax authority disagreed with the taxpayer. According tax authority standpoint the investor’s payments to subcontractors do not result from the contract concluded with subcontractors, so they cannot constitute the cost related to a specific business operation and confirmed by invoice or other document. Moreover those expenses are also not definitive. As a result those expenses shall be treated as tax non-deductible cost.

An opposite standpoint was represented by the Court in Gliwice. The court explained that the investor may include to tax deductible costs expenses for subcontractors in the part in which they will not be refunded in any way by the general contractor. The court underlined, that the expenses borne by the investor for subcontractors are not varying from any other expenses related to the business activity. As the liability of making such payments results directly from civil law provision, the said expenses do not have to result directly from the contract with the general contractor or with subcontractors to be treated as tax deductible costs.

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