Mateusz Rowiński | In Principle

The sale of shares in a real estate company is only the beginning, as the seller must face the VAT consequences of the transaction. Is the sale of shares in real estate companies treated differently under VAT than the sale of shares in other companies? Is this correct? And what can be done about it?

On VAT grounds, a merger may prove challenging for the acquirer if either the acquirer or the target applies proportional input tax deduction in the merger year.

A revised bill to amend tax regulations as part of the “Polish Deal” has been submitted to the parliament. How do the proposals involving transfer pricing look now?

On 19 August 2021, the President of Poland signed an act introducing a number of simplifications to VAT settlements. The changes are intended to improve taxpayers’ liquidity in connection to VAT settlements, deformalise certain procedures, and implement decisions of the Court of Justice of the European Union in cases lost by Poland.

Transfer pricing regulations have been included in the package of proposed changes to tax law implementing the political programme known as the Polish Deal. Some of these changes respond to market expectations and deserve applause. Others will complicate taxpayers’ lives. Here we examine the proposed solutions.

The proposed tax changes under the Polish Deal programme enshrine in law a method of calculating the debt financing cost limit which is disadvantageous for taxpayers. They offer a carrot to buyers of shares in the form of a deduction from the tax base of qualified expenditures on the acquisition of shares as part of consolidation relief, but also a stick in the form of a complete ban on treating interest on debt financing obtained from related parties for the acquisition of shares as a tax-deductible cost.

The bill to implement the “Polish Deal” programme would introduce the separate institution of a VAT group, previously unknown in the Polish tax system, enabling consolidation of the tax result within a capital group.

Transactions between related parties at a value above statutory thresholds must be identified in local transfer pricing documentation, but the regulations provide for a number of exceptions.

Although the definition of a “controlled transaction” has been introduced into the PIT Act and the CIT Act, taxpayers (and lawmakers) still have doubts which events require preparation of transfer pricing documentation. Today, we write about transfer pricing documentation in the case of contributions to share capital, share redemptions, and dividends.

Adjustments of transfer prices have generated a lot of uncertainty among taxpayers for a long time, as evidenced by the large number of individual tax interpretations issued in this area. Due to the change in regulations, and because the right to make an adjustment is affected by numerous factors, taxpayers seek interpretations from the revenue administration even when the facts are not very complicated.

“Shield 4.0” extends the deadlines for all obligated entities to file transfer pricing information (TPR), declarations on preparation of local transfer pricing documentation, and enclosures of group transfer pricing documentation. The earlier regulations extended the deadlines only for selected taxpayers.

One of the consequences of the pandemic and the resulting economic crisis may be the need for some taxpayers to discontinue projects. Do the Polish tax regulations allow for settlement of expenses incurred for discontinued projects under the CIT Act? Will the taxpayer have to make an adjustment of input VAT on expenses incurred in the course of work on such projects?