- Reporting of sales on the Internet – the President has signed the Act!
- Short-term remote work abroad can create a tax permanent establishment – new tax ruling
- There will be no expansion relief for rework of the finished product
- VAT exemption for small businesses in the European Union – planned changes
- New approach by tax authorities to tax online payments
- Family foundations – administrative courts discrepancies
1. Reporting of sales on the Internet – the President has signed the Act!
The President of the Republic of Poland has signed a law aimed at implementing the provisions of the DAC7 Directive (Council Directive (EU) 2021/514 of 22nd March 2021) into the national legislation. As we reported earlier, the new Act imposes an obligation on operators of online platforms to report information on sellers transacting through these platforms to the Head of the National Tax Administration (NTA). The provisions came into force on 1st July 2024.
According to the Act, the scope of reporting includes information on sellers who meet the following conditions:
- made more than 30 transactions during the year;
- achieved a total remuneration of more than EUR 2000 in a given year.
The Act also provides for certain exemptions.
The main (new) obligations of digital platform operators will include:
- collecting, verifying and reporting data on sellers;
- transferring aggregated information on sellers to the Head of NTA;
- electronic transmission of information on the basis of a specific model document published in the Public Information Bulletin (BIP).
The new regulations impose additional reporting requirements on digital platform operators, which sellers using online platforms must be aware of and comply with in order to protect themselves from potential sanctions.
We invite you to contact our experts at Nexia Advicero for more detailed information and a full analysis of the new reporting requirements.
2. Short-term remote work abroad can create a tax permanent establishment – new tax ruling
In a tax rulling of 17th May 2024 (no 0114-KDIP3-2.4011.174.2024.3.JM), the Director of the National Fiscal Information Service (NFI Director) indicated that a natural person conducting business activity working remotely from Portugal, but having tax residence in Poland, is obliged to tax earnings both in Portugal and in Poland.
Significantly, the NFI Director pointed out that the mere fact of having at one’s disposal a space used for business activities is sufficient for there to be a permanent establishment for tax purposes within the meaning of the corporate income tax Act (CIT Act). At the same time, it is irrelevant that it may have existed only for a short period of time. In turn, in order to avoid double taxation, the taxpayer should deduct the amount of Portuguese personal income tax (PIT) proportionally from the amount of Polish tax.
Performing remote work abroad for a short period of time may therefore result in the establishment of a permanent establishment, which in turn triggers the obligation to tax the income in the country where the work is performed.
However, it should be pointed out that in similar cases, administrative courts have ruled otherwise (for example, in the judgment of the Administrative Court in Wrocław of 10th October 2023, case file No. I SA/Wr 261/23). Therefore, each time it is important to conduct a thorough tax and legal analysis in the context of determining the place of taxation in the case of remote work carried out for both a domestic and a foreign contractor. We encourage you to contact us if necessary.
3. There will be no expansion relief for rework of the finished product
A product that has been modified by the taxpayer, rather than self-produced, does not qualify for a double deduction of promotion costs, the Director of the National Tax Administration (Director KIS) stated in a tax rulling of 27th May 2024 (no 0111-KDIB1-3.4010.161.2024.1.JG).
Pursuant to the provisions of Article 18eb of the Corporate Income Tax (CIT) Act, the pro-growth allowance, also known as the expansion allowance, allows a double deduction of the costs of promoting products produced independently by the taxpayer. It is important to note that the provision refers to products ‘manufactured by the taxpayer’, suggesting that these cannot be mere modified products. The double deduction of promotion costs includes, inter alia, costs of participation in fairs, promotional and information activities, adaptation of packaging and preparation of documentation.
In the request for the aforementioned interpretation, the taxpayer inquired about the possibility of double deduction of promotion-information costs (Article 18eb (7)(2) of the CIT Act) and whether the changes made by the Company to the purchased product meet the definition contained in Article 18eb (2) of the CIT Act (product made by the taxpayer). The director of the CIT determined that the changes made to the product do not meet the definition of a product made by the applicant, as they were not made from scratch and fully by the Company. Moreover, the costs of promotion-information do not fall within the scope defined in Article 18eb (7)(2) of the CIT Act. According to the clear position of the Fiscal Office, costs related to the promotion of products that have been modified and not manufactured by the taxpayer do not qualify for a double deduction.
Therefore, in order to benefit from the deduction, companies should carefully analyse the definition of ‘manufactured product’ when planning promotional expenses.
We encourage you to contact our tax law experts to ensure that the costs incurred meet all statutory requirements and can be correctly deducted in accordance with the applicable legislation.
4. VAT exemption for small businesses in the European Union – planned changes
The Ministry of Finance has proposed new regulations to allow small businesses to benefit from exemption from value added tax (VAT) within the European Union (EU), with the aim of making it easier for small entrepreneurs to conduct cross-border business.
In Poland, the exemption currently applies to taxpayers whose sales value did not exceed a total of PLN 200.000 (excluding tax) in the previous tax year. New companies can benefit from a proportional limit in relation to the period of activity in a given year. Currently, foreign companies initiating sales in Poland must settle VAT on the first transaction, which also applies to Polish companies operating in other EU countries.
The planned conditions for the exemption include small businesses, which will be able to benefit from the exemption across borders provided they register in their country of establishment and submit quarterly turnover reports in each EU member state. In addition, taxpayers will be required to comply with an overall EU limit of EUR 100.000 (in addition to the current national limit). Exceeding either of these limits will result in the loss of the exemption.
We encourage you to follow further updates related to the changes in tax legislation. For a more detailed analysis, we encourage you to contact us.
5. New approach by tax authorities to tax online payments
The individual interpretation of the Director of the KIS of 9th May 2024, no: 0111-KDIB2-2.4015. 34.2024.3.MM concerns the taxation of ʺdonationsʺ, i.e. voluntary/anonymous payments made to online creators. The Director of the KIS considered, unlike before, that donations do not constitute a donation and should be taxed as income from other sources.
The Director of the KIS noted that in order for a payment to be considered a ‘donation’, both the recipient and the donor must be known. Otherwise, it is not possible to verify the amount of the payments from the individuals, so we cannot consider them as donation agreements. Therefore, if a payment is not a donation, the provisions of the Inheritance and Gift Tax Act do not apply to it, i.e. the tax exemption cannot be applied.
Thus, income from ‘donations’ should be qualified as a revenue from other sources (Article 10(1)(9) of the PIT Act) and taxed according to the tax scale (according to the general rules at rates of 12% and 32% on income).
Bearing in mind the above ruling, it is worthwhile for the other creators, who recognised payments from anonymous persons as donations, to verify once again the income indicated to date in their tax returns. In this respect, it is worth applying to the tax authority for a tax rulling in your case to avoid possible tax consequences.
We will be happy to support you in the analysis of such payments as well as in the preparation of an appropriate application for a tax interpretation challenging this view.
6. Family foundations – administrative courts discrepancies
Family foundations can join foreign companies and funds without being taxed in Poland with corporate income tax (CIT). However, this issue is complex and causes controversy in the context of court judgments.
The scope of foundations’ activities is defined in Article 5 of the Law on Family Foundations, such foundations may participate in commercial companies, investment funds, cooperatives and entities of a similar nature, both domestically and abroad.
In individual interpretations, the tax authorities focus on the definition of ‘entity of a similar nature’. The Fiscal requires these companies to be CIT taxpayers, which makes foreign tax transparent entities excluded. Otherwise, it is necessary to tax their income from investments in foreign tax transparent entities at a CIT rate of 25%.
In some judgments of provincial administrative courts, the position of the tax authorities was upheld, while in others (ref. III SA/Wa 598/24, I SA/Łd 178/24), the position of taxpayers was deemed correct. In these judgments, which were positive for taxpayers, the courts indicated that the assessment of the status of a foreign entity should be based on its legal and not tax regulations. Thus, it does not matter whether they are tax transparent entities, what matters is their legal form in order to benefit from the exemption.
Nevertheless, the investment of family foundations in foreign companies and funds remains an ambiguous issue that may raise doubts among taxpayers until a uniform approach is adopted by the tax authorities and the courts.
If you need assistance in this area, our experts are ready to help. We encourage you to contact our experts at Nexia Advicero.
