Important changes to corporate income tax

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Tomasz Kośmider

1.02.2021

Recent years have seen many new obligations for CIT taxpayers as a result of numerous amendments of the Corporate Income Tax Act.

New rules of recognising debt financing costs as tax-deductible expenses (interest, interest portion of lease instalments, commission fees, charges) have been in force since 1 January 2018. The legislator introduced a maximum tax-deductible limit for debt financing costs.  This limit is calculated using the following formula:

The limit calculated according to the above formula should be increased by “the exempt amount” of 3 million zloty.

The limit applies only to the surplus of debt financing costs, which is calculated as follows:

1 January 2018 was also the effective date of the new regulation limiting the tax-deductibility of costs of intangible services purchased from associated entities. 

The limit calculated according to the above formula should be increased by “the exempt amount” of 3 million zloty.

The limit applies to, among other things, costs of the following:

• advisory services, market research, advertising, management and control, data processing, insurance,
• guarantee and surety services and similar;
• proprietary copyrights;
• licences;
• industrial property rights, e.g. trademarks.

Following the rules stipulated in the Personal Income Tax Act, the Corporate Income Tax Act introduced, effective 1 January 2018, a breakdown of revenues by revenue source. Revenue sources are divided into capital gains and other revenues.

Capital gains are a closed list of revenues specified in Article 7b of the Corporate Income Tax Act. They include, among other things, received dividends, received post-liquidation assets, revenues from sale of shares or all rights and obligations arising from membership in a partnership, or restructuring revenues.
The breakdown of revenues into revenue sources also means that taxpayers must allocate tax-deductible expenses to individual revenue sources and deduct losses within those revenue sources.

New rules of withholding tax deduction have applied to corporate income tax since 1 January 2019. Taxpayers who want to account for withholding tax according to preferential  rules (use a reduced tax rate according to the double taxation avoidance treaty or be exempt from taxation) must exercise due care. Due care means that you carefully check whether the payee carries on a genuine business activity or is really the beneficial owner of the paid amount.

Failure to exercise or insufficient exercise of due care (in respect of the scale and the type of business activity being carried on) is liable to a tax penalty of at least 10% of the taxable base of the payment to which the preferential tax rules were applied. 

New rules have been in force since 1 January 2019 as regards the tax-deductibility of costs of rental, lease, insurance and use of cars for corporate income tax purposes. 

After the amendment, the same maximum tax-deductible limit applies to the costs of car lease, rental and purchase. In the case of electric cars the limit is PLN 225,000 whereas in other cases the limit is PLN 150,000. Tax-deductible depreciation charges or lease instalments are determined in proportion to the vehicle’s market value of up to PLN 225,000 or PLN 150,000. The same accounting rules apply to vehicle comprehensive insurance.

The new rules have also limited the tax-deductibility of the running costs of cars used for both business and private purposes.  Since 1 January 2019, 25% of the running costs of such cars have been excluded from tax-deductible expenses.  

New rules have been in force since 1 January 2020 as regards the tax-deductibility of all payments for corporate income tax purposes. The general rule is as follows: a payment for an invoice of over PLN 15,000 gross made to an account not included in the whitelist of taxpayers or in disregard of the mandatory split payment mechanism is non-tax-deductible.

New rules were introduced on 1 January 2020, following the rules applicable under the Value Added Tax Act, as regards the tax-deductibility of outstanding debts and the taxable base adjustment for such debts.

A debtor who does not pay his liabilities within 90 days of the payment due date is obliged to reduce his tax-deductible expenses; at the same time, the creditor is entitled to reduce his tax-deductible base.

Please contact our experts, who will be glad to advise you on CIT issues.