- Deadlines for transfer pricing reporting (TPR) extended
- Rental of office and social containers without WHT
- Paying profit advances to general partners during the tax year, the limited partnership is not required to withhold flat-rate income tax
- New VAT exemption for defence activities + other VAT changes
- 10th anniversary of Advicero Nexia
1. Deadlines for transfer pricing reporting (TPR) extended
In Journal Of Laws of 2022, item 1301, the act of June 8, 2022 on the amendment of certain acts in order to automate the handling of certain matters by the National Revenue Administration, was published, providing for a change in the so-called of the COVID Act regarding the extension of the deadlines for submitting a declaration on the preparation of transfer pricing documentation and information on transfer pricing is known in 2021 (TPR). The provisions adopted by the Sejm are extended as follows: the deadline for submitting TPR information as follows:
- until September 30, 2022 – for TPR information and statements, the submission deadline of which expires in the period from January 1, 2022 to June 30, 2022, and
- by 3 months – for TPR information and statements, the submission deadline of which expires in the period from July 1, 2022 to December 31, 2022.
These solutions are to enter into force on the day the act is announced, but with effect from December 31, 2021. In practice, the above means that entities whose financial year ended on December 31, 2021, information on transfer prices and a declaration on the preparation of local documentation transfer pricing will have to be submitted by 31 December, 2022.
2. Rental of office and social containers without WHT
WSA in Gorzów Wielkopolski ruled on 24 March 2022 (case ref. I SA/Go 436/21) said “(…) it should be stated that the containers described in the facts of the case, which are the subject of the lease agreement, being structures having the form of a space enclosed by partitions (walls), with a roof and floor on the sides (with various equipment), intended for social purposes, are not industrial equipment within the meaning of Article 21 (1) of the CIT Act, because they fulfil only auxiliary functions and are not functionally used in the production process.”
It is worth mentioning that pursuant to Article 21 (1) (1) of the CIT Act, withholding tax (WHT) is levied, inter alia, on revenue for the use or right to use an industrial facility, including a means of transport. As a result of this issue, disputes arise between the tax authorities and the courts as to what is actually meant by the concept of industrial equipment. Common jurisprudence indicates that, when qualifying a piece of equipment, it is important first and foremost to do so based on the criterion of intended use, including in the context of containers.
In the above-mentioned judgment, the containers had mainly a social function and thus were intended exclusively for rental purposes for workers who carried out construction projects and, at the same time, analysed construction documentation in them. The Company pointed out that no materials or raw materials for the investment were stored in the containers in question. Moreover, they were in no way used in the production process and were not closely related to it.
The tax authority, despite detailed explanations provided by the Company, indicated that the Company should collect WHT on the territory of Poland because the containers should be treated as industrial equipment. Thus, payments made to an Austrian company for the rental of containers – are license receivables in the light of the CIT Act and the Polish-Austrian double taxation treaty.
The WSA, disagreeing with this position, stressed that since the containers have only a social and administrative purpose, they are not used in a production or industrial process and thus cannot be subject to WHT. The WSA indicated that it would be different, however, in the case of containers intended for the transport of raw materials or materials for such a construction project. Therefore, in each case it should be analysed whether there is a risk of withholding tax in similar situations.
3. Paying profit advances to general partners during the tax year, the limited partnership is not required to withhold flat-rate income tax
In accordance with the judgment of the Voivodship Administrative Court in Szczecin of 21 October, 2021, case ref. no. I SA/Sz 672/21, the tax obligation of a general partner arising at the moment of making an advance payment to him for participation in profits will transform into a tax liability at the moment of calculating the income of this Company.
In the present case, the limited partnership, in connection to becoming a CIT taxpayer as from 1 May, 2021, intended to make advances to the partners on the annual profit (in the proportions applicable between the partners) within the framework of the profit generated and the liquidity possibilities.
In the opinion of the Director of the KIS, the Company, as the tax remitter, would have to charge a lump-sum income tax on the income paid to the general partners on account of their share in the Company’s profit in the form of profit advances. This income is subject to taxation at the time of placing funds to the disposal of the taxpayer (general partner).
However, the Voivodship Administrative Court in Szczecin disagreed with the tax authority, stating that the moment of recognising the tax obligation due to the payment of profit advances is the moment of the actual payment of these advances (revenue actually obtained). However, the fact that tax liability arises does not mean that the taxpayer is obliged to pay the tax. This obligation arises only when, the tax obligation transforms into a tax liability – only after the income tax (CIT) of the limited partnership is calculated for the tax year from which the revenue from profit sharing was obtained.
This is the next ruling of administrative courts concerning the issue of collecting tax on advance payments from profits of limited partnerships stating that there is no obligation to collect monthly advance payments for tax purposes, as the tax liability arises only at the moment of calculating the Company’s annual income (CIT-8). Similar opinions on this issue have been issued by, for example:
- Voivodship Administrative Court in Gliwice in the judgment of 31 August, 2021, ref. no. I SA/Gl 881/21,
- Voivodship Administrative Court in Kraków in the ruling of 13 July, 2021, ref. no. I SA/Kr 789-795/21.
Recurring rulings in this respect provide great opportunities for taxpayers as to how to settle the tax due from general partners and limited partners in the most advantageous (and latest) manner.
4. New VAT exemption for defence activities + other VAT changes
In order to standardize VAT regulations for EU and NATO defense activities, a government draft has been prepared that implements the provisions of an EU directive (Directive 2019/2235). The main changes to be introduced are:
- VAT exemption for imports of goods by the armed forces of a Member States other than the Republic of Poland for the own use of such forces or civilian personnel accompanying them or for the purpose of supplying their messes or canteens, if such forces take part in defensive actions conducted for the purpose of implementing the European Union’s action under the Common Security and Defense Policy – the amendment concerns the inclusion in Art. 45 sec. 1 point 9 of the VAT Act not only to exempt from VAT the import of goods by the armed forces of the States Parties to the North Atlantic Treaty, but also to apply this regulation to the armed forces of the Member States participating in defense activities,
- VAT exemption for the supply of goods and services in the EU intended for use by the armed forces of a Member State or by the civilian staff accompanying them, or for supplying their messes or canteens, where those forces take part in defensive operations carried out for the purpose of carrying out the Union’s action under the Common Security and Defense Policy outside their Member State,
- Recognizing as the intra-Community acquisition of goods (WNT) of the movement of goods by the armed forces of a Member State participating in defense operations conducted for the purpose of carrying out an EU activity within the framework of the Common Security and Defense Policy from the territory of a Member State other than the national territory to the national territory, for their use or for the use of the civilian staff accompanying them – the amendment was included in Article 11 sec. 2 of the VAT Act. Recognition as WNT is possible when these goods have not been acquired in accordance with the general rules governing VAT taxation in the domestic market of a Member State.
Additionally, the Minister of Finance, in consultation with the Minister of National Defense, will be able, by means of an ordinance, to define the cases and procedure of tax refunds for the above-mentioned armed forces.
As indicated, the adopted solutions are designed to reduce administrative barriers and facilitate the crossing of borders by military transports, which should improve the EU’s defense activities and enable the implementation of the common security and defense policy.
The law in question shall enter into force on 1st July, 2022.
Below are some of the other VAT changes that are already or will soon be in force:
- possibility to issue structured invoices within the National e-Invoicing System (KSeF);
- introducing a new 15-day VAT refund deadline for non-cash taxpayers;
- allowing certain taxpayers paying the so-called Estonian CIT to submit quarterly returns;
- the effectiveness of the second anti-inflation shield, which reduces VAT rates on food, fertilisers and fuel, has been extended until the end of July.
Changes in VAT from 1st July, 2022:
- possibility to create a VAT group – entities related to each other financially, economically and organisationally. Related entities within a VAT group will have the possibility to settle VAT jointly, and the representative of these entities will be their representative;
- introduction of an obligation for VAT payers to ensure cooperation of an online cash register with a payment terminal under the threat of a fine of up to PLN 5 000.
Further changes in VAT – SLIM VAT 3:
- Introduction of a regulation on the applicable exchange rate for in plus and in minus adjustments;
- increase the proportion of deduction to 100% in case it exceeds 98% – the limit will be raised from 500 PLN to 10 000 PLN;
- the introduction of a possibility to forgo a correction if the difference between the final correction and the initial correction does not exceed 2 percentage points;
- exemption of the taxpayer from the obligation to issue advance and final invoices if the events took place in the same settlement period;
- the tax authorities will be able to waive the imposition of a VAT sanction on the taxpayer as a result of the CJEU judgment No. C-935/19 Grupa Warzywna;
- the sales threshold for a small taxpayer incurred up to 2 000 000 EUR per year.
In April, we started celebrating the 10th anniversary of Advicero Nexia. Each anniversary is an extraordinary event, and the opportunity to develop a business for such a long period is a great achievement for any company. It is an excellent moment to evaluate the activities carried out so far and it provokes reflection and brings memories back. Once again, we would like to thank our Clients, Friends and everyone who believed in Advicero Nexia at the beginning of our activity and helped us build the strong and professional organization we are today.