Changes in tax law in 2017
I. MINISTRY OF FINANCE INTRODUCES OBLIGATORY DRAFTS OF POWERS OF ATTORNEY
On 1.1.2016 new drafts of special powers of attorney (PPS-1) and powers of attorney for service (PPD-1) came into effect. The special power of attorney authorises one to act in a specific tax case before tax authority or a tax inspection authority. Tax authorities or tax inspection authorities may question the legal validity of special powers of attorney filed after 1.1.2016 in formats other than the ones provided for in the new regulations. We would also like to signal that the provisions regarding the special power of attorney and the power of attorney for service do not provide for a possibility of granting a further power of attorney.
Additionally, on 1.7.2016 a draft will be introduced for general powers of attorney which entitle the authorised entity to act on behalf of the taxpayer in all tax matters before tax authorities or tax inspection authorities.
Another new fact for the taxpayers will be the need for this document to be submitted to the tax authorities electronically only (with the use of the qualified certificate or the ePUAP trusted profile), rather than in hard copy, as previously.
Moreover, the Minister of Finance prepared the drafts in Polish only. It may be expected that cooperation with individuals who do not have command of this language will be more difficult and assistance of sworn translators will be required in a greater number of cases.
Another problem is the lack of interim provisions which would clearly resolve doubts concerning special powers of attorney and powers of attorney for service filed before 1.1.2016 as well as general powers of attorney filed before 1.7.2016.
II. STANDARD AUDIT FILE
As of 1.7.2016 a Standard Audit File (SAF) is to be introduced – the draft is currently in the Ministry of Finance. Initially, this new system of provision of tax information by taxpayers is to apply to large enterprises keeping their accounting books electronically.
The legislator will precisely define the form of the documents and the way in which they should be secured. According to the assumptions of the amended Act on Rules for Taxation, tax books in the form of the SAF will be submitted to tax authorities at their express request.
As of the beginning of July 2018 the above obligation is to be extended so as to apply to small and medium-sized enterprises. Until then they may use the new system optionally.
Legislation works on the SAF are still in progress and the form which the new system will ultimately have is yet not known.
III. PAYMENT OF TAXES BY THIRD PARTIES
1.1.2016 was the effective date of regulations permitting for payment of tax by third parties, but only to a very limited extent.
So far, this issue was not governed by tax regulations and tax authorities, generally, accepted tax payments made by third parties, if such payments were made with funds provided to the third party by taxpayers only for that purpose and the former acted solely as a substitute or commissionaire and did not become the owner of the funds. Authorities and taxpayers acted mainly on the basis of the judgment of the Supreme Administrative Court in the case I FPS 8/07 of 2008 which in this way permitted for third-party support in payment of taxes.
Despite this, the legislator decided to provide for the issue of tax payment by third parties. Pursuant to the new regulation, tax may be paid by the taxpayer’s spouse, descendants, ascendants, stepchild, stepfather and stepmother, current owner of the object of a compulsory mortgage or tax lien, if tax is secured with a compulsory mortgage or tax lien, or by another entity, if the amount of tax does not exceed PLN 1,000.
In the light of the literal wording of the new regulation, tax offices may not accept payments of tax by third parties in amounts exceeding PLN 1,000 now. This will result in non-expiry of the tax liability and charging of statutory interest on tax arrears.
However, there are doubts as to whether introduction of the new regulations actually excludes the possibility of tax payment agency, if the agent performs technical activities only, namely acts as a substitute who does not become the owner of the funds. The coming months will show whether acting in cooperation with a third party will continue to be possible, provided that it is ensured that such a third party will make the payments with funds that are at all times the taxpayer’s property.
IV. CORRECTIONS OF TAX RETURNS
The legislator cancelled the obligation for the taxpayers to provide clarification to corrections of tax returns. However, one has to bear in mind that the provisions of the Penal-Fiscal Code regarding voluntary disclosure have not changed. Therefore, in practice, the taxpayer continues to be obliged to provide clarification in order to discharge himself/ herself from penal-fiscal liability.
V. TECHNOLOGY CREDIT ON NEW TERMS
As of the beginning of 2016 the provisions of the PIT Act and the CIT Act regarding tax credits related to purchase of new technologies have been repealed.
They have been substituted with a new solution. New rules will apply to additional deductions of expenses for scientific research and development works, including development of prototypes, testing of new or improved products, etc. In particular, the taxpayer will be able to deduct from the taxable base 10 – 30% of the eligible costs listed in the new regulations. The amount of the credit will be conditional on the size of the entity and the type of the expense.
The previous regulations on the technology credit continue to apply to the taxpayers whose fiscal year does not overlap with the calendar year.
VI. TRANSACTIONS WITH AFFILIATED ENTITIES – TRANSFER PRICING
The repeatedly discussed amendments in respect of transfer pricing generally came into effect as of 1.1.2016.
However, taxpayers will have a lot of time to prepare themselves for the new regulations. The largest ones, namely groups with revenues of over 750,000,000 euros per year, will have to have documentation ready until the end of March 2017. The other taxpayers, namely those whose annual revenues or costs exceed 2,000,000 euros, will have to have documentation ready not earlier than at the end of March 2018.
All taxpayers prepare their documentation for 2015 still on the previous terms and for 2016 - all except for the largest taxpayers referred to above.
The majority of the taxpayers will feel the difference – either due to being discharged from the obligation to prepare documentation or due to being required to adjust themselves to the new, more demanding rules, not earlier than at the beginning of 2018 when documentation for 2017 will have to be prepared on the new terms.
VII. DELETION OF REGULATIONS CONCERNING CORRECTION OF TAX DECDUCTIBLE COSTS
Starting from 1.1.2016 the regulations of the PIT Act and the CIT Act regarding the obligation to correct tax deductible costs in the case of failure to pay the amount due have been deleted.
Until the end of 2015 in the case of including an amount arising from an invoice (bill) or an agreement, or another comparable document, in tax deductible costs and not paying such an amount – generally, within 30 days following the lapse of the time limit for payment, the taxpayer was required to reduce the tax deductible costs by the amount arising from such documents.
The interim provisions provide that taxpayers who before 1.1.2016 reduced tax deductible costs or increased revenues will be able to increase tax deductible costs on the previous terms (in the case of payment of the amount due).
VIII. VAT PRE-COEFFICIENT
The new regulations govern the rules of settlement of input VAT by entities which carry out both activities subject to VAT or exempt from VAT, as well as activities not subject to VAT (not constituting business activity on the grounds of the VAT Act).
In practice, the VAT pre-coefficient applies, first of all, to all entities, such as local government units, municipal companies, budgetary units, museums, theatres, foundations.
With some exceptions, taxpayers may either develop their own model of calculation of the VAT pre-coefficient or use the models proposed by the Minister of Finance.
IX. CHANGE OF COMPETENCE ON THE GROUNDS OF VAT
1.1.2016 was the effective date of new regulations governing local competence of tax authorities for VAT purposes. Currently, the tax authority competent for purposes of VAT settlement is the one locally competent for the registered seat or the place of residence of the taxpayer.
On the other hand, the situation of taxpayers who were parties to tax proceedings, tax inspection or audit activities, or other VAT–related tax matters commenced and not completed until 1 January 2016 will not change.
Until the end of 2015 competence of tax authorities was, generally, specified based on the place of performance of activities subject to taxation.
X. EXTENSION OF THE PCC LIST
As of 1.1.2016 the list of civil-law transactions subject to the tax obligation has been extended. The amendment provides for taxation of:
• Purchase of ownership of a common property or a common property right, or their parts by some of the existing co-owners to be further co-owned – in part of repayments or additional payments;
• Non-gratuitous separation of ownership of premises for the benefit of some or all co-owners;
• Exchange agreement, if at least one of the items is located in Poland or one of the property rights is exercised in Poland;
• Agreement for sale of property in the course of enforcement or bankruptcy proceedings;
• Every part of the revolving loan.
The rules concerning exemption of transfer of ownership of properties constituting farms or their parts from PCC have also been amended.
The liability of notaries public as tax remitters of PCC has been reduced, since they will be able to discharge themselves from liability for non-collected tax, if they prove lack of fault in non-collection of such tax.