tax | In Principle

The Ministry of Finance has published a draft of the long-awaited clarifications of the rules for collection of withholding tax and the obligations of tax remitters. The document is intended to resolve taxpayers’ doubts arising after amendment of income tax acts.

A tax amendment is lying on the Polish President’s desk. It will introduce, among other things, a tax on income from unrealised gains. As announced, the regulations should enter into force at the beginning of 2019.

At the end of August 2018, the Ministry of Finance announced future significant changes in the most important tax acts. These changes are to enter into force at the beginning of 2019. We wrote about some of these here last week. Now we present further changes proposed by the Ministry of Finance, as published in the draft act of 24 August 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Ordinance and other acts, which might be particularly important for taxpayers conducting business activity.

The Polish government is currently working on a completely new tax regime applicable to income from trading in cryptocurrencies (virtual currencies) for personal income tax and corporate income tax purposes. For PIT purposes, this income is to be taxed as income from cash capital at the rate of 19% regardless of whether the turnover is of a private nature or made in the course of business activity. For CIT purposes, the income from trading in cryptocurrencies will be classified as capital gains. These new rules would apply from 1 January 2019.

Regulations introducing the split payment mechanism for VAT entered into force in Poland on 1 July 2018. This mechanism in B2B transactions is designed as a weapon in the fight against VAT fraud.

Businesses are not required to use the split payment mechanism. But the initiative left to them does force them to examine whether it would be worthwhile to take advantage of this new instrument. Lawmakers went to some effort to encourage taxpayers to say yes.

The split payment mechanism for business-to-business transactions entered into force on 1 July 2018. Introduction of this mechanism was motivated by the aim of closing gaps in the tax system. But split payment affects not only the situation of VAT payers, but also banks.

Factoring is growing rapidly in Poland. According to the Polish Factors Association, the value of receivables that are the subject of factoring is growing year on year by an average of 18%. Introduction of split payment may strike at the financial liquidity of firms seeking financing, but it may also drive growth in the factoring industry. But every rose has thorns. Split payment complicates factoring transactions and introduces new risks for factors.

The principle of a two-instance system is a fundamental principle in public authority proceedings. At times this principle is severely limited, and at times merely fictitious.

The right to claim higher tax costs at 50% has recently been one of the most problematic issues in the relationship between tax authorities and taxpayers. At the beginning of the year this limit was raised twice, but the list of persons entitled to claim such costs was narrowed. Moreover, the tax authorities are consistently doing everything they can to stop taxpayers from taking advantage of this rate. So who is the 50% write-off intended for, and what are the criteria for eligibility?

Under a proposed amendment to the Personal Income Tax Act, from 1 January 2018 the compensation of management board members will be taxed at regular rates (18%/32%), whether paid in cash or bonuses in the form of derivatives of financial instruments or other property rights.

The defectiveness (unlawfulness) of a tax decision isn’t enough. Injury must also be proved, and an ordinary causal link between issuance of the decision and the injury.