Poland's Ministry of Finance has announced that on 16 November 2021, President Andrzej Duda signed into law the Act amending the Personal Income Tax Act, the Corporate Income Tax Act, and certain other acts. The Act provides for the introduction of the tax measures of the Polish Deal reform and generally applies from 1 January 2022.
Regarding personal income tax, the Ministry notes several measures, including:
- An increase is the tax-free threshold for individuals to PLN 30,000, regardless of earnings;
- An increase in the 32% personal income tax bracket threshold from PLN 85,000 to PLN 120,000; and
- A reduction in the flat tax rates for professionals, including a reduction in the rate from 17% to 14% for doctors, nurses, and engineers and a reduction in the rate from 15% to 12% for IT specialists, programmers, and other IT professionals.
Further, the release notes measures for strengthening investment and expansion, which include:
- An increase in the special deduction for expenses of approved R&D centers from 150% to 200%, as well as an extension of the special deduction to costs for obtaining and maintaining patents;
- An increase in the deduction for employment of employees engaged in R&D to 200%;
- The introduction of an additional 30% deduction for costs associated with prototypes, including trial production costs and costs for introducing new products to market, with the additional deduction capped at 10% of income;
- The introduction of new provisions allowing taxpayers to simultaneously benefit from both the tax relief for R&D activities and the patent box regime, meaning that taxpayers will be allowed to deduct costs qualifying for the R&D relief from income qualifying for the patent box regime;
- The introduction of an incentive to promote robotization (automation), which allows taxpayers conducting industrial (production) activities to deduct an additional 50% of the costs incurred for robotization, including costs for the purchase of industrial robots and related machines and peripherals, intangible assets for operating industrial robots, training services, etc.;
- Changes to improve the distribution tax (Estonian CIT) regime, which include:
- extending the scope of eligible entities to include limited partnerships, limited joint-stock partnerships, simple joint-stock companies, and cooperatives;
- removing the minimum increased capital expenditure/investment requirements;
- removing the PLN 100 million income threshold during the application of the regime and the additional 5% tax when exceeding the threshold; and
- reducing the standard distribution tax rates to 10% for qualifying small taxpayers and to 20% for other taxpayers.
Measures are also noted for attracting capital and investors to Poland, including:
- The introduction of a new Investor Desk for investors that will include the issuance of a single binding investment agreement, "Interpretation 590", providing investors a single opinion on all tax consequences for an investment in Poland; and
- The introduction of a new VAT group regime and an option for financial institutions to choose to include their activities within the scope of VAT in order to allow for the deduction of input VAT.
Lastly, the tax reform also includes several other important measures not mentioned in the Ministry release. Such other measures include:
- A new minimum tax levied at a rate of 10% on resident taxpayers and permanent establishments in Poland of non-residents, including capital groups, if they incur an operating loss (excludes capital losses) or report a profitability ratio not exceeding 1% based on taxable income;
- A new tax on shifted profits that will be levied at a rate of 19% (corporate rate) on costs incurred, directly or indirectly, for the benefit of a related party that constitutes a receivable for the related party (i.e., payments to a related party) if certain conditions are met, including that the related party is subject to low tax in its jurisdiction of residence;
- Revisions to strengthen the CFC rules, including an extension of the scope of the passive income condition, a change in the low-tax condition (25% lower than Polish tax), and new rules targeting shell companies with specific conditions;
- A new Polish holding company regime, providing a 95% participation exemption for dividends received from domestic and foreign subsidiaries, as well as a 100% exemption of gains from the sale of shares, unless deriving at least 50% of their value from immovable property in Poland; and
- Revisions to the transfer pricing documentation rules, including:
- merger of the declaration on the preparation of transfer pricing documentation and application of arm's length pricing into the transfer pricing information return (TPR) so that only one form is required, with the deadline for the TPR extended to the end of the eleventh month after the end of the entity's tax year;
- withdrawal of the requirement to include benchmarking and comparability analysis for controlled transactions concluded by micro and small taxpayers and for transactions, other than controlled, concluded with a tax haven entity;
- extension of the deadline for the submission of local transfer pricing documentation to 14 days after the request of the tax authority; and
- extension of the deadline for the preparation of local transfer pricing documentation to the end of the tenth month after the end of the entity's tax year.
Additional details of the reform measures will be published after the final version of the Act is published in the Official Gazette.