- R&D relief – who and when can use it
- Settlement of losses (provisions “in force” from 1 January 2019 – further delay)
- Due diligence in practice – the first judgement!
- Sale of a trademark outside VAT – a benefit for sure?
- The relief for “bad debts” in income tax – since January 1St 2020.
- Business Breakfast 5.03.2020 – VAT and CIT 2020 – new regulations and practical problems
1. R&D relief – who and when can use it
The R&D relief is intended for both PIT taxpayers (Art. 26e of the PIT Act) and CIT taxpayers (Art. 18d of the CIT Act). R&D relief is associated with research or development activities. Taking advantage of the relief does not require specialized tests under laboratory conditions. The R&D relief is addressed to all taxpayers conducting business activity in Poland subject to income tax in the field of research and development (Art. 5a, points 38-40 of the PIT Act and Art. 4a, points 26-28 of the CIT Act).
R&D activity is understood as creative activity, including scientific research or development work, undertaken systematically to increase knowledge resources and to use knowledge resources or to create new applications. Using the word of creativity indicates that research and development activity is such an activity that is focused on creating new and original solutions, often unique in nature, which are not of a reproductive nature. In turn, the premise of regularity is understood as a prohibition on extending – in a simplified sense – the incidental activities of the taxpayer. The Acts on CIT and PIT, respectively, also contain definitions of scientific research and development works. Both of these definitions refer to the regulations of the higher education act. Analysis of these concepts leads to the following conclusions that B+R relief can be related to three main areas of activity (Frascati): scientific and application research, development works.
In the field of scientific activity, it also includes artistic creation. For an activity to be considered as research and development, it must meet basic criteria. To apply the relief, it is necessary to incur specific costs.
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2. Settlement of losses (provisions “in force” from 1 January 2019 – further delay)
The recent period has brought Polish entrepreneurs further negative information, promoted at first as facilitations for them. As it turns out, a new, favorable way of settling losses (up to PLN 5 million) will only apply when settling for the year 2020. Information about this fact has not been included in the amendment to the CIT and PIT Acts, however, you can read about it in the Ministry’s of Finance information brochure.
The amendment to the CIT and PIT laws introduced a different way of settling losses, which allows one-off loss deduction from income from a specific source, in any of the five consecutive tax years, by an amount not exceeding PLN 5,000,000. The uncredited amount shall be cleared in the remaining years of this five-year period, except that the amount of the reduction in any of these years may not exceed 50% of this loss.
A one-off settlement of the loss of up to PLN 5 million applies to losses arising in tax years that start after December 31, 2018. It follows that it is only possible to settle the loss that arose in 2019. Only with the settlement for 2020 will it be possible to apply new regulations favorable to most enterprises.
3. Due diligence in practice – the first judgement!
The due diligence regulations introduced a year ago, in relation to withholding taxation, have not yet come fully into force. However, due to the difficulty in their practical application, taxpayers requested their interpretations, and one of the cases was already assessed by the Court of first instance.
On January 14, 2020, the Voivodship Administrative Court in Krakow in case I SA / Kr 1269/19 assessed the obligations of payers in not collecting withholding tax. The verdict was issued on the basis of PIT Act and a double taxation agreement with Ireland, but the theses are so general that they can be applied to all payers. According to the oral justification, such verification is to be complete, i.e. the payer must examine all the conditions resulting from the provisions in order not to collect tax. It is also about Polish provisions, despite the supremacy of international agreements ratified by statute. Secondly, it must be real, which the payer will have to document.
4. Sale of a trademark outside VAT – a benefit for sure?
The sale of a trademark outside of business purposes also brings tax benefits. Activation of the value of the mark on the grounds of income taxes is known and currently questioned by the authorities (as tax optimization). In the interpretation of the director of the National Tax Information of November 20th, 2019 (S-ILPP1 / 4512-1-201 / 16/19-S / MC) we read that this transaction is also not subject to VAT.
The value of the trademark falls within the category of “intangible assets” referred to in the definition of a service subject to VAT. This is an operation against consideration, also in the case of a contribution in kind, which was related to in this interpretation. In this case, the only basis for not considering this activity as non-taxable VAT was not acting as a VAT taxpayer due to the sale of a portion of private property. Although such an assessment is in glaring contradiction to the case law regarding the sale of plots, it is also unfavorable. The buyer of the trademark is usually a business entity, so he is interested in deducting VAT from the purchase invoice or for in-kind contribution. Therefore, the lack of taxation is not favorable for him.
5. The relief for “bad debts” in income tax – since January 1St 2020.
From a long time taxpayers VAT can use the relief for “bad debts”. To eliminate payment delays, from 2020 a “bad debt relief” was also introduced in the income taxes.
The essence of this relief is the possibility for creditors to reduce the tax base by the value of debts, that have not been settled or sold, within 90 days from the date of the payment deadline as specified in the invoice or bill or in the contract. If the debtor pays, the creditor will have to increase the tax base and pay tax. At the same time, an obligation was introduced to increase the tax base by the debtor by the value of liabilities, that were not settled or sold, within 90 days from the date of the payment deadline as specified in the invoice or bill or in the contract. Similarly, in the case when the debtor pays, of obligations he will have the right to make adjustments to the settlement period, in which the liability was settled. These are not the only conditions for its use, and the new provisions are already raising doubts.
6. Business Breakfast 5.03.2020 – VAT and CIT 2020 – new regulations and practical problems
The event will take place at Advicero Nexia premises in Warsaw (Moniuszki st. 1A, 9th floor)
on 5th March 2020
from 9:15 am to 11:15 am
During the Business Breakfast our experts will discuss the following topics:
- VAT Quick fixes 2020
- New formal conditions provided for the application of the 0% rate in ICS – which regulations we apply in 2020
- JPK VDEK and repealing the obligation to submit VAT returns from April 2020
- Taxpayers’ White List – first experiences in applying new restrictions
- Mandatory split payment and tax carousels – how to adapt
- VAT Matrix
- Income tax bad debts relief
- WHT – current status of entry into force of deferred strict regulations and direction of future changes
- Settlement of the year 2019 in income tax (possibility of applying the 9% rate, new rules for settlement of loss, hypothetical cost of financing Notional Interest Deduction)
The breakfast will be held in Polish. Participation is free.
Please confirm your attendance by sending ‘Name, Surname, Company name’ to this email: sdmytruk@advicero.eu .