Tax procedures

The WHT due diligence procedure is an instruction specifying how to demonstrate due diligence when making foreign payments and ensuring the correct settlement of withholding tax when benefiting from exemptions and reduced tax rates. The procedure reduces the potential risk in case of payments to foreign entities for income from interest, licenses, various types of intangibles, performance-based services and sea or air transport.

Not collecting withholding tax or collecting it at a lower rate is possible only if the Polish payer making the foreign payment exercises due diligence in verifying the recipient's eligibility for exemption from this tax.

The procedure of due diligence in withholding tax settlements defines:

• taxation principles
• the basis for applying preferential tax collection rates
• verification process along with its documentation
• templates of essential documents
• template of statements from contractors along with procedures for dealing with a contractor in case of transactions exceeding 2 million PLN annually

We offer a support in preparing a procedure to ensure due diligence under WHT rules and securing verifications that conditions for applying an exemption or preferential withholding tax rate are fulfilled.

The VAT due diligence procedure is a specific step-by-step description of actions that a taxpayer should perform to protect themselves from the negative consequences of a VAT audit. In other words, this procedure is a confirmation that one has thoroughly verified one's counterparty prior to making a transaction.

In the event of an audit, the tax office can challenge a specific deduction of VAT. Having the VAT due diligence procedure enables the assessment of whether you are entitled to deduct input tax.

The VAT due diligence procedure must indicate:

• instructions on how to verify a new or existing counterparty
• defined processes for dealing with uncertainties
• the person responsible for verifying the counterparty in a given transaction

KR Group support clients in drafting a due diligence procedure for the settlement of VAT. The provided document, along with application instructions, will be drafted based on information gathered from the finance and accounting department, the purchasing department and the sales department (or their counterparts within the company).

VAT procedures are descriptions of actions that enable the proper fulfillment of all requirements imposed by VAT regulations. These instructions are a set of guidelines guaranteeing full comfort when deducting input tax thanks to correctly implemented procedures related to the purchasing process, as well as when applying preferential 0% VAT rates for intra-community transactions (WDT) or exports, combined with a method of verifying the Company's counterparties in connection with the implementation of sales process procedures.

The VAT procedure, alongside the VAT due diligence procedure through implementing detailed stages and scopes of contractor verification, will allow you to avoid potential disputes with tax authorities regarding the right to deduct VAT in the future.

KR Group offers support in preparing a procedure adapted to the company's processes. The prepared document and its application can protect the company from fiscal criminal liability.

The MDR procedure is an intra-company instruction aimed at preventing a failure to comply with the obligation to provide information on tax schemes. Pursuant to Article 86l of the Tax Ordinance, having an MDR procedure is required for companies that are, employ, or pay promoters whose revenues or costs exceeded the equivalent of PLN 8 million in the year preceding the fiscal year.

In particular, the MDR procedure describes:

• actions taken by the company to prevent non-compliance with the obligation of reporting tax schemes
• all measures applied to fulfill MDR obligations
• principles and methods of document retention
• audit principles aimed at ensuring compliance with MDR regulations and procedures

Failure to possess and adhere to the Procedure may result in a fine of up to PLN 2 million. In the event of the absence of an internal procedure and a failure to fulfill the reporting obligation, the Head of the National Tax Administration may impose a penalty of up to PLN 10 million.

The CIT diligence procedure represents a specific set of recommendations that enable the fulfillment of increasingly complex requirements in taxpayer CIT settlements. The procedure serves as an instruction manual for legally settling this highly intricate and rule-laden tax, while also actively managing its amount, including effectively utilizing tax incentives and exemptions (such as IP BOX, Estonian CIT, R&D relief, or robotics relief), and utilizing depreciation to adjust the tax amount.

This procedure may also encompass areas such as minimum tax, tax on transferred profits, or taxation of Controlled Foreign Corporations (CFCs).

KR Group comprehensively supports in preparing due diligence procedures for the settlement of CIT, considering its special regulations and the advantages to be gained from this tax.

The procedure for acquiring intangibles defines the rules for documenting the true nature of intangible services, as well as confirming and proving their provision to the taxpayer. This procedure includes a carefully developed system for collecting evidence tailored to the nature of the acquired intangible service, as well as the individual situation and capabilities of the taxpayer, minimizing the risks of excluding the acquisition from tax deductible expenses.

It is particularly important when a company makes substantial acquisitions of intangible services, including legal, accounting, consultancy, marketing, advertising, management, data processing, guarantees and warranties.

Should you be interested in preparing a procedure - please feel free to contact our experts, who will provide more detailed information affecting your business.

Instructions in case of a tax audit are a protocol enabling the efficient coordination of activities related to the presence of tax auditors at the company's premises or notification of a tax audit. A growing number of companies opt to implementing these instructions due to the rising number of audits and their effectiveness each year.

As part of the implementation, the following will be introduced:

• principles of communicating with the tax authority
• principles regarding the circulation of correspondences during the tax audit
• identification of individuals responsible for representing the entity during the tax audit, as well as reviewing documentation for the examined period to make decisions regarding potential adjustments in settlements

The knowledge of the rights and obligations of the audited entity and, indirectly, of the employees performing specific functions in the organization, will efficiently manage the situation during information about a potential tax audit in the organization. The development of an audit calendar, on the other hand, will make it possible to effectively meet the deadlines that arise during an audit.

A tax policy is a set of guidelines which ensure proper control of fulfilling all types of obligations imposed by tax law. Tax policy enables efficient management of entity taxation and compliance with obligations. Failure to fulfill these obligations may lead to criminal or fiscal penalty liabilities.

The policy covers areas such as decision-making, internal audit, monitoring and responding to changes, or the use of official safeguards.

It is essential to have these procedures in place for large CIT taxpayers (over PLN 50 million in revenue), particularly those subject to tax strategy regulations.