Changes to Polish income taxes in 2016
By Artur Plutowski, EFS Group Sp. z o.o.
In summary, the revision of reporting obligations under the BEPS results in the following changes to transfer pricing:
- Local file: an entity of a multinational group (annual revenue or costs above EUR 20 million) will be required to provide: a master file report containing standardised information relevant to all group members and (ii) a local file specifically related to transactions carried out by said entity.
- Tax havens or low-tax jurisdictions: an entity of a multinational group (annual revenue or costs above EUR 10 million and/or executing transfers to entities registered in such jurisdictions) will be required to provide a simplified report on transactions with associated entities.
- Country-by-country reporting: an entity of a multinational group (annual, consolidated revenues or costs above EUR 750 million) will be required to provide a comprehensive report reflecting the activities and taxes paid in each country of operation.
- Taxpayers with annual revenues or costs of less than EUR 2 million will fall outside the scope of transfer pricing documentation requirements.
- The management/control shareholding qualifying as a related party has increased to 20% (previously 5%).
The country-by-country reporting obligations came into force on 1 January 2016, while the remaining changes will take effect from 1 January 2017.
A new condition for applying participation exemption has been introduced. Dividends or other profit distributions will not benefit from withholding tax (WHT) exemption if they pertain to an agreement, transaction or activity which does not reflect business reality and that has a fictitious character. The onus is on the recipient to prove the authenticity of the arrangement.
New research & development (R&D) incentives were introduced on 1 January 2016. However, the incentives passed by parliament are significantly less generous than the original proposals.
Taxpayers will be entitled to benefit from the “qualifying expenses” (deductible from the taxable base) as follows:
- 30% of remuneration and related social security expenses of employees involved in R&D activities; and
- 10% (20% for micro and SME) of the qualifying expenses, for example (i) for materials and supplies directly related to R&D activities, (ii) for expertise, opinions, advisory and equivalent services, and expertise for the purpose of R&D activities, if provided by a qualified scientific entity, (iii) for rental of research equipment used exclusively for R&D purposes and (iv) depreciation related to fixed assets and intangibles used for R&D purposes.
Published: January 2016 l Photo: Radoslaw Maciejewski - Fotolia.com