Managing Partner at Thedy & PartnersMarket overview
Originally Published in March 2020
Taxes should be relatively low, the related regulations stable, clear and rational and the tax authorities fair and co-operating – probably that is what most of us would like to experience in terms of taxation. However, as in all other areas of life and business, the reality is unfortunately more complex.
The tax environment is still changing. The new regulations impose more restrictions mainly in the compliance area which will require further adjustments of procedures and supporting IT infrastructures. These regulations include e.g. (i) obligatory reversal of business costs in the case of late payments to contractors, (ii) a lack of tax deductibility of business cost as well as joint and several VAT liability in the case of payments to bank accounts which have not been reported for tax purposes, and (iii) new complex regulations regarding VAT split payment.
“The new regulations impose more restrictions mainly in the compliance area which will require further adjustments of procedures and supporting IT infrastructures”
Changes regarding a new withholding tax regime have been postponed again till mid-2020. The new rules mean a new pay-and-refund tax system on qualified payments above a PLN 2 million threshold to related and unrelated contractors (with some exceptions). It seems that the new rules are too strict and there are expectations that they will still be modified before they become enforced. Nevertheless, taxpayers doing business in Poland should start getting prepared and in particular review their holding and financing structures. This is important as already on the ground of the current tax provisions, using the withholding tax exemptions or lower tax rates, e.g. for dividends or interest payments, may be questioned in case of structures lacking a business substance and/or beneficial ownership status.
Another regulation that you definitely need to take into account are the mandatory tax disclosure rules which have a very wide and unclear scope. They cause a lot of uncertainty as to what and when to report and require a lot of external consulting support.
Last but not least, the tax authorities do not forget that they need to contribute to the state budget and are quite active in looking for further tax related measures.