Tax procedures

Tax procedures – for whom?

Tax procedures at KR Group

Tax procedures – KR Group offer

FAQ

• What is a tax procedure?

  Tax procedures are specific guidelines – a set of rules of conduct that regulate the manner in which tax obligations are fulfilled in accordance with applicable regulations. Having documented tax procedures increases the company’s security and helps demonstrate due diligence before tax authorities.

• What is the WHT due diligence procedure?

  The due diligence procedure for withholding tax defines the correct course of action when making foreign payments, ensuring proper settlement of withholding tax using exemptions and reduced tax rates. 

  The procedure reduces potential risk in the case of payments to foreign entities in respect of income such as interest, royalties, various types of intangible services, entertainment services and maritime or air transport.

  Not collecting withholding tax or collecting it at a lower rate is only possible when the Polish payer making a foreign payment exercises due diligence in verifying the recipient’s entitlement to an exemption from that tax.

  The due diligence procedure for withholding tax settlement defines:

  • taxation principles;
  • the basis for applying a preferential tax collection rate;
  • the verification process and its documentation;
  • templates of key documents;
  • a template for counterparty declarations, together with the procedure for dealing with a single counterparty where the transaction value exceeds PLN 2 million per year.

  KR Group offers clients support in drawing up a procedure ensuring due diligence under WHT regulations and safe verification of whether the conditions for applying an exemption or preferential withholding tax rate are met. 

• What is the VAT due diligence procedure?

  The VAT due diligence procedure is a step-by-step description of the actions a taxpayer should take to protect themselves against the negative consequences of a VAT audit. In other words, this procedure confirms that, prior to entering into a transaction, the counterparty was thoroughly verified in terms of the risk of acting in bad faith.

  In the event of an audit, the tax office may challenge a specific VAT deduction. Having a VAT due diligence procedure makes it possible to assess whether a given counterparty may be a source of problems in a future tax audit.

  The VAT due diligence procedure must include:

  • instructions on how to verify a new or existing counterparty;
  • processes for dealing with doubts;
  • the person responsible for counterparty verification within a given transaction.

  KR Group supports clients in drawing up the VAT due diligence procedure. The document delivered, together with its application guide, will be prepared on the basis of information gathered from the finance and accounting department, the purchasing department and the sales department. [LINK VAT]

• What is the VAT procedure?

  VAT procedure describes the actions that enable all requirements imposed by VAT regulations to be fulfilled correctly. These guidelines provide a comprehensive framework for comfortable input tax deduction. Correctly implemented procedures cover matters related to the purchasing process, the application of preferential 0% VAT rates for intra-Community supplies (WDT), and the area of goods exports combined with the method of verifying the Company’s counterparties in connection with the implementation of sales process procedures.

  The VAT procedure, combined with the VAT due diligence procedure through the implementation of detailed stages and scopes of counterparty verification, will make it possible to avoid potential disputes with the tax authority regarding the right to deduct VAT in the future.

  KR Group supports clients in drawing up a procedure that is tailored to the processes operating within the company. The prepared document, together with its application, may protect the company from criminal fiscal liability.

• What is the MDR procedure?

  The MDR procedure (reference to the MDR tab) is an internal company instruction aimed at preventing failure to comply with the obligation to report tax schemes. Pursuant to Article 86l of the Tax Ordinance, having an MDR procedure is required for companies that are promoters, employ them or pay them remuneration, whose revenues or costs exceeded the equivalent of PLN 8,000,000 in the year preceding the financial year.

  The MDR procedure describes in particular:

  • how to properly identify a tax scheme
  • all actions necessary for the correct reporting of MDR
  • the scope and scale of gathering evidence of MDR obligation fulfilment
  • The responsibilities of individual roles within the organisation necessary for fulfilling MDR requirements.

  Failure to have and apply the Procedure carries a penalty of up to PLN 2,000,000. In the absence of an internal procedure and where the reporting obligation is simultaneously not fulfilled, the Head of the National Revenue Administration may impose a penalty of up to PLN 10,000,000.

• What is the CIT due diligence procedure?

  The CIT due diligence procedures are a set of recommendations that make it possible to meet all the increasingly extensive requirements in CIT taxpayer settlements. The CIT due diligence procedure is a guideline enabling the lawful settlement of this highly complex tax, which is laden with special rules, as well as actively managing its amount, including organising the settlement and documentation of tax reliefs and exemptions (such as: IP BOX, Estonian CIT, the R&D relief or the robotisation relief) and using depreciation to regulate the tax amount.

  This procedure may also cover areas such as the minimum tax, the tax on shifted income or the taxation of CFCs (controlled foreign companies).

  KR Group provides comprehensive support to clients in drawing up the CIT due diligence procedure, taking into account its special provisions and the benefits achievable under this tax. 

• What is the intangible acquisitions procedure?

  The intangible acquisitions procedure defines the rules for documenting the actual nature of intangible services and for confirming and proving their performance for the benefit of the taxpayer. This procedure contains a detailed evidence-gathering system, tailored to the nature of the acquired intangible service as well as the individual situation and capabilities of the taxpayer, enabling the minimisation of risks that the acquisition will be excluded from tax-deductible costs.

  Having this procedure is particularly important when a company makes significant acquisitions of intangible services, including legal, accounting, advisory, marketing, advertising, management, data processing, guarantee and surety services.

  Should you are interested in preparing the procedure, we invite you to contact our experts, who will provide more detailed information relevant to your business. 

• What is the tax audit contingency guide?

  The tax audit contingency guide is a document enabling the efficient coordination of activities related to the presence of auditors at the Company’s registered office, or to receiving notice of a tax audit. An increasing number of companies choose to have it, as the number of audits and their effectiveness grow year on year.

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

  • rules for communication with the tax authority;
  • rules regarding the flow of correspondence during a tax audit;
  • rules and scope for providing data and documents to tax authorities;
  • the appointment of persons responsible for representing the entity during the tax audit, as well as a review of the documentation for the period under examination in order to decide on any potential correction of settlements.

  Knowledge of the rights and obligations incumbent on the audited entity; and indirectly on employees holding specific functions in the organization; allows for efficient management of the situation upon receiving notice of a potential tax audit. Developing an audit calendar will enable effective compliance with deadlines arising during the course of the audit. [LINK the proceedings]

• What is a tax audit register and how should it be maintained?

  The tax audit register is a company’s financial record in which revenues, expenditures and invoices are recorded. Maintaining the register correctly supports the company’s preparation for a tax audit, minimises the risk of errors and ensures order in documentation. 

• What is tax policy?

  Tax policy is a set of guidelines that ensures control over the correctness of fulfilling all types of obligations imposed by tax legislation within the organisation’s tax processes. Tax policy enables effective management of the entity’s taxation and compliance with obligations, failure to fulfil which may result in criminal fiscal liability or the risk of punitive tax liabilities.

  It covers areas such as decision-making, internal audit, monitoring and responses to changes, and the use of official safeguards.

  Having this procedure is mandatory for large CIT taxpayers (with revenues above PLN 50,000,000.), in particular those subject to the tax strategy regulations. [LINK Tax Advisory tab]