Polish Deal 2.0 at CIT. We know the assumptions
The Finance Ministry has been announcing for many weeks the publication of a draft law, an amendment to the regulations introduced under the Polish Deal (which today can already be referred to as the Polish Deal 1.0). The bill itself is not yet here, but the Finance Ministry has published the assumptions for the changes. They are numerous, and some of them – very significant.
Minimum tax – from 2023, but completely new
The minimum tax was one of the most controversial elements of the Polish Deal 1.0. The concept was so ill-conceived that it is proposed to suspend the collection of this tax in 2022. This is certainly a very good change, but the modifications that will take effect in 2023, according to the announcement, are also important.
Firstly – the profitability ratio, above which the tax will not be collected, is to be raised twice – to 2%. At the same time, the methodology of its calculation will change significantly. How? The information in this regard is not complete, but it is known that from the calculation of income/profitability are to be excluded payments from the lease contract of fixed assets. This is a very important change for the leasing industry, because depreciation of fixed assets under current regulations is excluded from this calculation, while lease payments are not, resulting in discrimination against this form of financing. Changes in this area are also to apply to excise taxes or income from the sale of receivables to a factoring company.
The catalog of exclusions is also to be expanded – including small taxpayers, taxpayers where the majority of income was earned in connection with the provision of health care services, taxpayers whose profitability in 1 of the last 3 tax years was above a 2% rate, and taxpayers in bankruptcy or liquidation.
The end of the hidden dividend
The regulations on hidden dividends are to be revoked even before they came into effect.
It is difficult to say whether Polish Deal 2.0 is just a temporary overlay, or whether we should expect another edition of Polish Deal and further revolutionary changes. Above all, however, one should not give undue weight to the announcements published at this point. It seems that the failure of Polish Deal 1.0 has prompted policymakers to reflect, and this time the changes will not only be better consulted, but also implemented more in advance.
Polish Holding Company more attractive
Provisions regarding the PHC’s design to avoid taxation of dividends (those that do not enjoy the dividend exemption) and income from the sale of shares are to be significantly improved. First and foremost, PHC will be entitled to exemption from taxation even if it previously enjoyed a dividend exemption. The current exemption for dividends will be expanded – from 95% to 100%.
Estonian CIT more precise
The changes regarding lump sums on corporate income will not be revolutionary – instead, the Finance Ministry plans to make the regulations slightly easier or more precise. It is known that the rules for accounting for private use of cars and the timing of advance payments of dividends are to be changed. Unfortunately, the description of the planned changes does not indicate their direction.
Easier documentation for “haven” transactions
In this area, it is primarily planned to make the documentation thresholds (materiality thresholds) for direct and indirect haven transactions more realistic, the exceeding of which gives rise to tax liability. This is to be done by raising the thresholds (in the case of direct haven transactions – twice; in the case of indirect transactions – the thresholds will have different amounts for certain types of transactions). In addition, the presumption of residency of the beneficial owner in the tax haven is to be eliminated (clarifying that the provision applies to the beneficial owner of the receivable resulting from the transaction). In addition, it is proposed to move away from the construction of the presumption of residency of the actual owner in a tax haven to the exclusion of the documentation obligation in certain cases.
In addition to the above, (relatively minor, it seems) changes have also been announced in the areas of withholding tax, tax on flipped income, tax on income from buildings, CFC. There are also plans to clarify regulations on debt financing costs and tax loss accounting.
Revolution or evolution?
Most of the changes indicated in the project’s assumptions are of a clarifying nature, although some are critically important for taxpayers – most notably the minimum tax and the hidden dividend. As of today, it is difficult to say whether Polish Deal 2.0 is just a temporary overlay, or whether we should expect another edition of Polish Deal and further revolutionary changes. Above all, however, one should not give undue weight to the announcements published at this point. It seems that the failure of the Polish Deal 1.0 has made policymakers think twice, and this time the changes will not only be better consulted, but also implemented more in advance. With any luck, maybe this time amending already enacted legislation will not be necessary. At this point, the published assumptions are not very detailed, and looking at the course of the legislative work on Polish Deal 1.0, the earliest moment for a fitting to implement the new regulations will be the signing of the law by the President.