The evening of 26 July 2021 saw the publication of legislation proposed to amend tax regulations to introduce the “Polish Deal”. The proposed changes are very broad, with the draft statute itself running to 226 pages and the explanatory memorandum to 229. The draft is now undergoing the public consultation process which is scheduled to end on 9 August 2021. Most the changes are proposed to enter into force on 1 January 2022.
For now we offer a synthetic list of the major changes:
- changes to the taxation of employees and business:
- the tax-free amount will increase to PLN 30,000 for employees subject to general taxation and the threshold for the higher tax bracket will go up to PLN 120,000;
- change to the calculation of health insurance contribution for sole traders (the fixed contribution to be scrapped);
- heath insurance contribution will not be deductible from tax;
- a so-called middle class allowance to be introduced to cushion the non-deductibility of health insurance contribution (but not for sole traders);
- depreciation of residential buildings and apartments will not be deductible for tax purposes;
- a package of innovation relief measures:
- R&D and IP Box allowances can be used in parallel;
- prototype allowance (30% of expenses additionally deductible from tax base, up to 10% of net income);
- innovative staff support allowance – businesses using the innovative staff support allowance and being personal income tax remitters will be able to lower the tax withheld from income of their innovative employees (whether hired under contracts of employment or civil law contracts);
- robotization allowance (50% of expenses to purchase and install industrial robots will be additionally deductible from tax base);
- a package of business development relief measures:
- IPO allowance – allowance for first public offering and for investment in stock market debuts;
- consolidation allowance – expenses related to corporate acquisitions will be additionally deductible from income tax base;
- expansion allowance (business expansion expenses will generally be deductible twice, subject to conditions);
- allowance for venture capital investors;
- so-called Estonian corporation tax;
- a package of relief measures for investors:
- Centre for Investor Tax Services (Investor Desk) will be created;
- so-called interpretation 590 – investor can enter into an agreement (arrangement) with tax authorities regarding the tax effects of its proposed project (applicable to projects worth at least PLN 50 million);
- option to create a VAT Group;
- preferential treatment for Polish holding companies (exemption for 95% of corporation tax on dividends from subsidiaries, full corporation tax exemption for profits from sale of shares in subsidiaries);
- optional VAT on certain financial transactions;
- measures to facilitate the use of tax groups (some conditions, including the profitability condition, will be abolished);
- introduction of EBITDA (and its calculation algorithm) as the ratio to apply in calculating maximum borrowing costs;
- introduction of the ultimate WHT collection system;
- books of account, tax revenue and expense ledgers, and tangibles and intangibles records will have to be kept electronically and submitted in a structured format on a monthly/quarterly basis (as of 1 January 2023).
We will keep you up-to-date with the progress of this legislation.
If this issue pertains to your business and you are interested in our assistance please contact our tax experts at WTS&SAJA.