August 26, 2022
Poland plans to amend provisions implementing tax on shifted profits
On 28 June 2022, the Polish Government announced draft legislation implementing changes to the Polish Corporate Income Tax (CIT) law. The proposed changes affect several areas of taxation; however, most of them are related to areas which were covered by the latest tax reform implemented as of 1 January 2022.
The potential impact of the proposed changes, including the areas where the 1 January 2022 tax reform has not yet become effective, should be assessed by businesses in order to prepare for the changes and to undertake the necessary actions.
One of the significant changes under the proposed amending act makes certain modifications to the shifted profits tax regulations.
For an overview of the other proposed amendments, see the EY Global Tax Alert, Poland proposes significant changes to Corporate Income Tax Law, dated 7 July 2022.
According to the currently applicable rules, the 19% shifted profits tax applies to Polish entities and to entities with a permanent establishment (PE) in Poland and is levied on certain categories of costs (such as financing costs, royalties payments, payments for selected services) incurred in a tax year by a Polish CIT payer towards (directly or indirectly) a related entity applying a low effective tax rate. For an overview of the current legislation, see the EY Global Tax Alert Poland plans to introduce tax on shifted profits, dated 28 September 2021.
The draft proposal will make, among others, the following modifications to the current provisions:
Since the shifted profits tax can have a very broad impact and affect payments or arrangements under genuine business operations, it is important to assess such an impact for each organization that could occur and undertake actions as necessary.
The legislative process is still ongoing, so it is expected that the wording of the regulations may change. EY will continue to monitor these developments.
For additional information with respect to this Alert, please contact the following:
EY Doradztwo Podatkowe Krupa sp.k., Warsaw
EY Doradztwo Podatkowe Krupa sp.k., Wroclaw
Ernst & Young LLP (United States), Polish Tax Desk, New York