Poland | Major changes in Polish law

13/01/2022

As of January 2022, major changes have been introduced to the law in Poland regarding taxes and payroll. SCHNEIDER GROUP is prepared to guide you through the new legal situation and easy transition to the new legal situation.

Below we present information covering selected issues connected with the recently enacted Polish Deal, divided into thematic blocks:

  • CIT
  • PIT/ZUS
  • Innovation write-offs

1. CIT

I. Introduction of the so-called minimum income tax and liquidation of the limit for costs of intangible services (15e of the CIT Act)

The new tax is to apply to companies that are CIT taxpayers and to tax capital groups which in a given year posted a loss on operating activities or the share of income generated from their operating activities in their revenues did not exceed 1%.

The tax rate has been set at 10% with the tax base equal to 4% of operating income plus excess expenses which represent debt financing costs and the value of deferred tax arising from the disclosure of unamortised intangible and legal assets. The excess expenditure will also include the costs of intangible services which have hitherto been excluded from tax costs under Article 15e.

Taxpayers will be able to deduct the minimum income tax from the tax calculated under the general rules in the following 3 tax years.

Excluded from taxation, among others, will be newly established entities (including start-ups), financial enterprises, taxpayers with a simple shareholding structure and entities in a difficult economic situation (those that have recorded a decrease in revenue of at least 30% compared to the previous year).

II. Exclusion of debt financing from Tax Deductible Costs

Exclusion from Tax Deductible Costs of interest on loans from a related party used directly or indirectly for capital transactions, in particular for the acquisition or subscription of shares, acquisition of all rights and obligations in a company that is not a legal entity, contribution of additional contributions, and increase in the share capital.

III. Limitation of debt financing costs (Article 15c of the CIT Act)

Debt financing costs can be deducted from revenues up to either (i) PLN 3 million or (ii) 30% of taxable EBITDA.

2. PIT / ZUS

I. Main changes for employees and contractors:

  • Raising the tax-free amount to PLN 30,000
  • Increase of the income tax threshold to PLN 120,000
  • No tax deductibility of health insurance contributions
  • Introduction of a middle-class relief – persons earning between PLN 68,412 and PLN 133,692 per year will be entitled to an additional tax relief to offset the adverse changes resulting in a reduction of net remuneration (does not apply to contracts of mandate).

II. Main changes for sole traders:

For entrepreneurs taxed according to the scale:

  • tax reduction amount, tax threshold, middle-class relief – as in point I
  • new health contribution – 9% of income
  • no tax deductibility of health insurance contributions

For entrepreneurs taxed according to a flat rate:

  • no tax-deductible amount, no middle-class relief
  • new health insurance contribution – 4.9% of income
  • no tax deductibility of health insurance contributions

For entrepreneurs taxed in the form of a lump sum on registered income:

  • reduction of the lump sum for the medical and technical professions from 17% to 14% and for certain income connected with the provision of IT services from 15% to 12%
  • new health insurance contribution, also lump sum – from approx. PLN 307 to PLN 920 / month
  • no tax deductibility of health insurance contributions

III. Changes for board members remunerated on the basis of a resolution on appointment:

  • The tax-reducing amount will be PLN 5,100 (i.e., the tax-free amount is PLN 30,000) – this applies only to incomes taxed according to the scale but will not be linked to their amounts.
  • Tax threshold from income of PLN 120,000
  • Introduction of a health insurance contribution – 9% of revenues
  • No tax deductibility of health insurance contributions

3. Innovation write-off

I. R&D write-off

  • Increasing the level of the deduction under the R&D write-off of costs of personnel conducting R&D activity, incurred by the taxpayer on the basis of an employment contract, contract of mandate or contract for the delivery of a specific work from 100% to 200%.
  • Increase of the levels of deduction of eligible costs for research and development centres (except for costs related to the protection of intellectual property) from 150% to 200%.
  • A new type of relief for innovative employees – in the form of a possibility to deduct R&D costs from the amount of advance payments for income tax concerning employees performing R&D work in at least 50% of their working time in a month.

II. Write-off for prototypes

  • A new instrument allowing the deduction from income of 30% of the eligible costs of the trial production of new products (excluding services) and the costs of marketing them.

III. Simultaneous R&D write-off and IP Box

  • Possibility of cumulation of the R&D write-off and IP Box by deducting the income from an eligible intellectual property right (IP) by the eligible R&D costs recognised under the provisions of the R&D write-off.
  • The income calculated for IP Box purposes from a particular IP right will not only be taxed at the preferential rate of 5% but also reduced by the costs recognised and deductible as eligible costs under the R&D write-off it incurred in relation to that IP right.

IV. Robotisation write-off

  • The possibility of using a relief for taxpayers engaged in manufacturing consisting in the right to deduct from income an additional 50% of deductible costs incurred for robotisation. The relief will be available from 2022 to 2026.

How SCHNEIDER GROUP can help

Our specialists of the Labour and Tax Law Practice will provide consulting services on interpreting legislative changes and developing necessary local normative acts.

We will be happy to take care of your bookkeeping so that you can concentrate on your core business.

Disclaimer: We accept no responsibility for decisions made on the basis of the information contained, in this article.

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