Changes To Draft Law Introducing "Polish Deal"

On 8 September 2021 the Finance Ministry presented proposed changes to draft legislation introducing the "Polish Deal". The changes, made on the back of public consultations regarding the initial proposal (see our Newsletter 39/2021), will mainly affect the following issues:

• The "extended tax residence" concept:
  • The proposal now provides that a foreign company will be deemed to be a tax resident of Poland if its affairs are managed from the territory of Poland in a continuous and organised manner (the initial proposal was that having a Polish-resident member of the board would be sufficient for the company to acquire the Polish tax resident status).
• Social insurance contributions:
  • The health insurance contribution from sole traders subject to flat-rate personal income tax is to be 4.9% of net income, instead of 9% as proposed initially. But FM did not abandon the idea that the contribution will not be deductible from tax by any PIT taxpayers.
  • There will be a precise specification of what is the basis of assessment for health insurance contribution in the case of the flat-rate gross income tax regime or fixed-amount tax regime.
  • There will be one payment date for all social and health insurance contributions and it will be later than before, i.e. 20th day of next month.
• Duration of allowances:
  • The time to use the business expansion allowance, the heritage asset allowance and the prototype allowance is supposed to be extended to 6 years.
• "Estonian" CIT:
  • The tax on profit distributions to taxpayers other than "small taxpayers" would fall from 30% to 25%.

Also, the "Polish Deal" proposal now provides for a new tax, called "large corporations tax", which is intended to be payable by companies and tax groups reporting a loss or a net income of less than 1% of operating income (not applicable to start-ups, financial enterprises, enterprises in temporary difficulties, and organisations with simple structures). The tax would amount to 0.4% of gross income and 10% of what are called "excessive" expenses (which are supposed to include borrowing costs, costs of professional/management services, unamortisable intangibles).

The FM's release is silent on any necessary revisions to other major changes proposed in the "Polish Deal" legislation (especially as regards "hidden" dividends, borrowing cost limitations, tax group compliance).

WTS&SAJA was involved in the consultation process, making a case and urging for major modifications of the "Polish Deal" proposal, including in the above areas.

We will keep you up-to-date with the progress of this legislation.

If this issue pertains to your business and you are interested interested in our assistance, please contact your WTS&SAJA consultant.