Transactions with tax havens - an attempt to liberalize current regulations

On the 25th of August 2022, a government draft law amending the Corporate Income Tax (CIT) Law and other laws (the Draft), which partially takes into account comments received during public consultations, was sent to the Parliament.
Author:
Olga Kucewicz
Junior TAX Manager

Expected changes include:

  • repealing the existing regulations on reporting indirect transactions, ie art. 11 sec. 1a paragraph. 1b of CIT, and consequentially completely repealing the obligation of indirect tax haven transaction documentation, the collection of declarations from contractors and verification of the beneficial owner of the receivables;
  • raising the documentation threshold for direct tax heavens transactions (Art. 11k (2a) and Art. 11o (1) of the CIT Act), respectively to the following levels:
    • 2 500 000 PLN - in the case of a financial transaction, or
    • 500 000 PLN - in the case of a transaction other than a financial transaction;
  • the obligation to apply the arm's length principle to "direct" tax heaven transactions.

Our opinion

If these regulations come into force, they could be considered revolutionary. Indeed, the amendments provide for the repeal of the provisions on the reporting of indirect transactions with retroactive effect, i.e. the application of these provisions from the fiscal year beginning 1.01.2021. 

The Draft law and the introduction of the aforementioned changes should be evaluated positively.  

We do not have the final version of the act yet.

Important

Despite the fact that the introduction of these regulations were initially met with a negative assessment from businesses and experts - we cannot guarantee that the regulations in the above form will come into effect retrospectively.

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