Poland: Proposed amendment to corporate income tax, individual income tax

Poland: Corporate income tax, individual income tax

A draft bill, published 12 July 2017, includes provisions that aim at amending the corporate income tax and individual (personal) income tax provisions as well as the “lump sum income tax.”

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The main objective of the draft bill is to “tighten” the current corporate income tax system in order to align taxes paid by large multinational enterprises in Poland with actual profits derived in the Polish territory by preventing the use of “aggressive tax planning.” The provisions are expected to be effective 1 January 2018. 

Overview of proposed changes

Among the changes to the corporate income tax are proposals that would:

  • Introduce a minimum taxation of commercial property of an initial value exceeding PLN 10 million
  • Revise the controlled foreign corporation (CFC) rules (CFC status in part to depend on effective tax rate of the foreign company)
  • Revise the rules on the taxation of demergers regarding taxable profits and costs upon the sale of shares in the demerged company 
  • Broaden the scope of the real estate company clause to include almost all commercial activities
  • Introduce of an “economic substance” rule for contribution of business
  • Increase the one-off tax depreciation threshold to PLN 5,000 (up from PLN 3,500)
  • Introduce the concept of two sources of income—one from capital and the other from business activity
  • Change the thin capitalisation rules (e.g., extended application to cover debt financing)
  • Limit the tax deductibility of fees for intangible services (e.g., advisory, bookkeeping, advertisement, marketing, legal services)
  • Revise the rules governing “tax capital groups”
  • Exempt entities related to the state treasury or local government from the requirements for transfer pricing documentation

 

For individual taxpayers, the proposed changes would:

  • Revise the tax classification of certain revenues from realisation of financial instruments or securities; and provide a change in classification of certain sources of income including employee incentive schemes and taxed at progressive tax rates
  • Limit tax deductible depreciation write-offs
  • Restrict application of the 8.5% lump-sum tax scheme for rental income

 

Read a July 2017 report [PDF 368 KB] prepared by the KPMG member firm in Poland

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