NEWSLETTER No 75, November 2017
Please be aware that 1 January 2018 will bring amendments to the legislative Act regarding personal income tax. The more important changes include:
- New classification of sources of taxable revenue accruing from exercise of securities rights and from derivative financial instruments. Through the end of 2017, such revenues were subject to tax at 19%. Once the legislative amendments come into effect, revenue from exercise of securities rights and from derivative financial instruments acquired or purchased as a benefit in kind or as a gratuitous benefit shall be ascribed to the specific revenue source from which such benefit in kind or a gratuitous benefit originates. This change targets beneficiaries of incentive schemes based on derivative securities, and its coming into force will result in revenues from such sources being taxed at the rate applicable to other revenues from the legal relationship in connection with which the taxpayer came to hold the securities
or derivative instrument in question. In practical terms, this means that
such revenue shall be taxed at the rate applicable to the given employment contract or management contract; in other words, revenue from virtual securities shall be subjected to the progressive tax scale.
- Introduction of a statutory definition of “incentive scheme”, more detailed elaboration of the rules subject to which arising of taxable income from acquisition or purchase of shares under a share-based incentive scheme may be deferred. Preferential tax treatment will now apply only to shares in joint stock companies (akcje), not to shares in limited liability companies (udziały). The moment when taxable income is deemed to arise might be deferred until the shares have been sold if: (i) the shares are acquired or purchased within an incentive scheme established by a joint stock company (or by the dominant entity of such a company) pursuant to a general meeting resolution; (ii) such incentive scheme is addressed to persons bound to the joint stock company by an employment contract or another form of civil contractual relationship the revenues from which are classed as personal activity, and (iii) the taxpayer actually acquires or purchases shares in the joint stock company or in its corporate parent in execution of the incentive scheme. The preferential treatment extends to persons directly entitled to acquire or purchase shares as well as to persons entitled to acquire or purchase shares in exercise of rights arising from securities,
derivative financial instruments, or of other rights. Moreover, the possibility of deferring taxation will now apply also to shares in joint stock companies based in countries outside the European Union and the European Economic Area, as long as the jurisdiction in question has executed a double tax treaty with Poland.
- New rules governing taxation of the income of a controlled foreign company (CFC). The legislative amendments concern the rules governing classification of foreign subsidiaries as CFCs, for instance as regards the requirement of exercising control or of low taxation of foreign income. And thus, under the new rules, a controlled foreign company is one: (i) in which the taxpayer holds, whether directly or indirectly, on its own or together with affiliated entities, at least 50% of the voting rights in a subsidiary, or at least 50% of the shares entitling their holder to partake of profits; and (ii) whose actually remitted income tax is less than 50% of the tax which would have been paid by such company in Poland. Furthermore, beginning in the new fiscal year, CFCs with revenue not exceeding the equivalent of EUR 250,000 will no longer benefit from a tax exemption.
- Exclusion of tax neutrality of transactions comprising effectuation of an in-kind contribution in the form of a business enterprise or an organised part thereof where economic justification is lacking. The new iteration of the legislative Act regarding personal income tax expands the catalogue of tax-neutral transactions which might be challenged if the tax authorities deem them to be motivated by tax evasion considerations. For the moment being, the “little clause” applied under the legislative Act regarding personal income tax may refer to share exchange transactions. Starting 1 January 2018, meanwhile, the clause may also be applied to in-kind contributions comprising a business enterprise or an organised part of a business enterprise.
- New tax on commercial real estate. The new legislative Act regarding personal income tax introduces taxation of a new revenue category for taxpayers holding commercial-cum-service properties or office properties of a market value in excess of PLN 10 million. The excess of the property’s initial value over PLN 10 million (established as at the first day of every month) shall now be subject to tax at 0.035%.
- New rules for taxation of artists and creators of copyrighted works. The tax-deductible expense cap with respect to copyright disposals will be doubled from PLN 42,764 to PLN 85,528 per annum. At the same time, entitlement to this exemption has been restricted to activities expressly indicated in the statute, including creative pursuits and artistic pursuits in specified areas, research and development work, and authorship of opinion pieces. This means that some individuals who now benefit from the right to deduct 50% from the taxable amount accrued from copyright disposals stand to lose this privilege as of 1 January 2018.
The statute amending the legislative Act regarding personal income tax has already passed through the lower and upper houses of Polish parliament and is awaiting signature of the president.
Should you require more information about the imminent changes to the Polish personal income tax regime outlined above, or if you want to analyse the impact of these changes on your existing operating model, please do not hesitate to contact us: