- Withholding tax – when is the threshold of PLN 2 million applicable
- Draft explanatory notes to the amended withholding tax regulations
- No PIT for taxpayers under 26 years of age
- Major changes in VAT in 2019
- The tax authorities will check the taxpayers benefiting from R&D relief
- Draft amendments to the Tax Code – tax rulings
1. Withholding tax – when is the threshold of PLN 2 million applicable
On 27 June 2019 The Minister of Finance issued an ordinance extending until 31 December 2019 the period during which remitters of withholding tax, due on payments made to Corporate Income Tax payers, will be able to apply the previously in force taxation rules.
Importantly, no analogous regulation was issued to remitters making payments to natural persons, subject to the regulations of the Personal Income Tax Act.
This means that remitters should verify who is the recipient of payments subject to withholding tax – if it is a natural person, then already from 1 July 2019 they should verify exceeding the threshold of PLN 2 million and collect additional documentation if necessary.
2. Draft explanatory notes to the amended withholding tax regulations
On 19 June, the Ministry of Finance published a draft of explanatory notes on the amended withholding tax regulations. The aim of the project is to clarify the concepts and present the manner of correct conduct and fulfillment of obligations functioning as of 1 January 2019. Until the end of June, the taxpayers could have submitted their remarks on the draft explanations.
The explanations are rather general in nature but can provide useful guidance to remitters and taxable persons on how to apply the amended rules. Entities will be obliged to verify foreign contractors to confirm the right to benefit from exemptions or reduced rates of withholding tax.
Most of the explanatory notes relate to the requirements to meet the definition of a beneficial owner and to understand what it means to conduct a real business. The Ministry of Finance also focuses on the issue of due diligence to be applied by Polish remitters.
Link to the draft (Polish version): https://www.gov.pl/web/finanse/konsultacje-podatkowe-w-sprawie-objasnien-do-przepisow-w-zakresie-zasad-poboru-podatku-u-zrodla
3. No PIT for taxpayers under 26 years of age
A draft amendment to the Personal Income Tax Act was prepared, according to which natural persons up to the age of 26 are to be exempt from income tax in relation to revenues up to the limit of the first tax threshold, ie up to the amount of approx. PLN 85.5 thousand (http://www.sejm.gov.pl/sejm8.nsf/PrzebiegProc.xsp?nr=3551). Once this threshold is exceeded, the surplus will be taxed in accordance with the general rules. The exemption is to apply to income from the employment relationship, outlay work, cooperative employment relationship and contracts of mandate. In order to avoid abuses, young entrepreneurs will not be covered by the exemption. Social security and health insurance contributions will be calculated in the same form as before. As for 2019, the exemption will apply to revenues up to PLN 35.6 thousand and young people will have to make a statement confirming that they meet the conditions for exemption.
The amended Act is planned to apply from 1 August 2019. The amendment is currently the subject of parliamentary work.
4. Major changes in VAT in 2019
The year 2019 is another year of changes in VAT – below are some of the major amendments that businesses will face.
From September 2019, the split payment mechanism will apply to industries more sensitive to fraud, such as the sale of steel, electronic equipment, gold and fuel. Every payment of more than PLN 15,000 will have to be settled in a proper way – the net amount will go to the seller’s account and the VAT will be paid to a separate account kept by the bank. The most affected will be the sellers, who will suffer from the deterioration of their financial liquidity. Split payment is a response to the current reverse charge mechanism.
The White List of VAT taxpayers will also be in force from September 2019. It is a tool which is supposed to eliminate the risk of getting tangled up in the so-called fraud carusels. The list will contain data of both verified VAT taxpayers and those deleted from the list. The list will make it possible to verify whether the entity is included in the list of active taxpayers and what history and bank account it had.
It is planned to introduce JPK files, which would replace monthly VAT-7 and VAT-7K declarations. The proposed JPK_VAT file is to combine inventories and declarations in one. It is to be an electronic document, which will gather in one place all the necessary data for VAT settlements.
5. The tax authorities will check the taxpayers benefiting from R&D relief
Tax offices verify the actual conduct of research and development works by entrepreneurs. From the beginning of the relief’s existence, during the first 2 years (2016-2017) the taxpayers deducted almost PLN 800 million. After its expansion from 2018, it is estimated that the deductions could amount up to PLN 5 billion.
As part of the audit, the authorities ask for projects settled as part of the R&D relief and the type of costs that have been incurred for them.
6. Draft amendments to the Tax Code – tax rulings
Changes are planned in the Tax Code regarding the written interpretations of tax law. The rates for issuing an interpretation of European Union law will increase up to PLN 2,000, while the standard rate will remain at PLN 40. Due to the fact that VAT and excise duty are harmonised taxes in the EU and the interpretation of national regulations requires knowledge of Community regulations, a higher rate may apply to all interpretations issued in respect of such taxes. In addition, a higher rate is to be applied in situations where the tax benefit is higher than PLN 500,000 or where the action is deemed to be artificial, or where an individual interpretation relates to conventions on avoidance of double taxation.