Poland’s new general anti-avoidance rules target MNCs Tax Insights

Tax Insights
from International Tax Services
Poland’s new general anti-avoidance
rules target MNCs
May 25, 2016
In brief
The Tax Ordinance Act (‘Draft bill No. 367’ or ‘the draft bill’), if enacted, would introduce general antiavoidance rules (GAAR) into Polish tax law. Polish authorities have discussed the bill since 2014, and it
has been accepted by the Polish Parliament. The bill is expected to be referred to the Polish President for
enactment into law.
Earlier this year, Poland introduced an anti-abuse clause in accordance with the European Union (EU)
Parent-Subsidiary Directive as amended by Council Directive no. 2015/21. However, those provisions
apply only for withholding income tax exemption purposes related to dividends paid to residents of EU
member states. There currently are no broader GAAR provisions in Poland’s tax law. If enacted, the new
GAAR legislation would allow the Polish tax authorities to recharacterize, for tax purposes, transactions
designed with the main purpose to gain tax benefits or disregard the translations that do not have any
real economic or business rationale other than tax avoidance.
The Polish Parliament intends to make the draft bill effective before Summer 2016.
Poland also released for public discussion a draft bill introducing amendments to the corporate income
tax law, including: introduction of categories of non-resident income subject to taxation in Poland;
ending deferral of taxation of share exchanges when one of the primary aims of the transaction is tax
avoidance; changing the taxation of in-kind contribution of assets other than a going concern; and basing
application of the withholding tax exemption for interest and royalties on whether the recipient is the
beneficial owner thereof.
In detail
GAAR
According to the draft bill,
transactions with the main
purpose of obtaining a tax
benefit — defined broadly to
include tax deferrals —
contrary to the object and
purpose of the tax regulations
shall not result in tax
benefits. If the tax authorities
detect artificial transactions
designed with the main
purpose of gaining tax
benefits, the tax
consequences of such
transactions will be assessed
as if the alternative
‘appropriate’ transaction had
occurred.
If transactions do not have
any real economic or
business rationale other than
tax avoidance, the tax
authorities may completely
disregard such transactions.
Those transactions shall be
deemed artificial if they
would not be carried out by a
taxpayer acting in reasonable
manner, and the transaction’s
objectives are contrary to the
purpose of the tax law.
Under the draft bill, the tax
authorities will not issue tax
rulings on such matters, and
rulings issued will not protect
www.pwc.com
Tax Insights
a taxpayer if tax avoidance is
identified during tax audit (this
restriction will not apply to tax rulings
issued before the new law enters into
force). However, taxpayers would be
able to apply for a ‘securing opinion’
from the Minister of Finance. The
taxpayer should include a description
of the planned transactions and their
economic purpose in the application.
The Minister will examine the
application and decide whether the
described transactions are designed
with the purpose of obtaining tax
benefits within the meaning of the Tax
Ordinance Act.
The current draft provides that the
amendments would enter into force
30 days after they are promulgated.
The transitional provisions of the
draft bill were revised in April 2016 to
retroactively extend the scope of the
GAAR. The current version of the bill
provides that if transactions carried
out before the draft bill enters into
force have tax effects after that date,
the transactions may be questioned by
the tax authorities if the taxpayer
obtains a tax benefit as a result of the
transactions after the GAAR is
introduced. Transactions that may be
questioned under this provision
include corporate group
restructurings and sales of
trademarks.
Proposed corporate income tax
(CIT) law changes
Lower CIT rate for small taxpayers
and taxpayers commencing activities
The draft bill would introduce a new
15% CIT rate for ‘small taxpayers,’
defined as taxpayers reporting gross
sales for the preceding tax year of no
more than EUR 1.2 million. (The
standard CIT rate is 19%.) The lower
CIT rate also would apply to taxpayers
commencing business activities in
their first year of such operations. The
2
lower tax rate would not apply to
capital tax groups (a group of
companies that opted to be treated as
a single taxpayer).
nominal value basis, as under the
current rules, for an in-kind
contribution executed before the new
legislation takes effect.
Non-resident income subject to
taxation in Poland
The change would eliminate existing
controversies regarding taxation of inkind contributions, and would
negatively affect intra-group
restructurings.
The draft amendment would treat
some types of income of non-resident
taxpayers as earned in Poland and
therefore subject to taxation in
Poland, including:
 income from receivables settled by
entities resident in Poland,
regardless of where the agreement
is concluded or executed
 income from securities and
derivatives quoted on a Polish
stock exchange
 income from the transfer of shares
in a company, income from a
partnership or investment fund
with assets composed directly or
indirectly of at least 50% real estate
or rights to real estate located in
Poland, including participation in
foreign collective investment
institutions and
 dividends, interest, and other
payments subject to withholding
tax paid by Polish tax residents.
Changes in taxation of in-kind
contributions
The proposed amendments would
change recognition of taxable
revenues related to in-kind
contributions of assets other than a
going concern.
Taxable revenues no longer would be
equivalent to the face value of the
shares issued in exchange for the
contribution. Instead, taxable revenue
would correspond to the market value
of the contributed assets. However,
according to the transitional rules, the
revenue should be calculated on a
The proposed amendments also
include a provision applicable to the
establishment of a foreign company or
a capital increase for such a company
that is not subject to formal
registration in the country of the
company's seat. That amendment
provides that revenue from the inkind contribution would be created at
the moment of the transfer of the inkind contribution to the foreign
company.
Beneficial ownership requirement for
withholding tax exemption for
interest and royalties
The proposed amendments provide
that the requirement to apply for
exemption from withholding tax
(WHT) on interest and royalties paid
to associated companies from the
European Union would be that the
interest recipient is a beneficial owner
of that interest.
To obtain the WHT exemption, the
Polish payor would have to obtain a
written statement confirming that the
recipient company or permanent
establishment is a beneficial owner of
the payment.
No deferral of taxation for share
exchange lacking business
justification
Taxpayers would not be able to treat a
share-for-share exchange as a taxneutral transaction when one of the
primary goals of the transaction is tax
avoidance. This goal would be deemed
pwc
Tax Insights
to exist if the share exchange does not
have business justification.
Cancelation of shares in case of spin
off
The draft amendments address
ambiguities relating to a spin-off of
companies when the number of shares
in a company being spun off remains
unchanged while their nominal value
decreases.
The takeaway
The GAAR’s main purpose is to target
multinational companies (MNCs) that
minimize their tax liabilities in Poland
through the use of tax-avoidance
measures.
MNCs should analyze existing and
planned business structures and
arrangements with Polish entities, and
consider their compliance with the
proposed GAAR.
The new GAAR would apply to the tax
benefits resulting from transactions
completed before the new provisions
come into force when the tax benefits
are obtained after the amendments
take effect. These transactions could
involve internal financing; share-for-
share exchanges; and mergers or demergers.
Taxpayers also should maintain
proper documentation that explains
the reasoning behind business
decisions.
The new GAAR rules may apply to
many taxpayers, including MNCs and
Polish companies.
The proposed CIT law changes may
affect MNCs that receive royalty and
interest income from Poland,
companies starting their business in
Poland, and MNCs planning
reorganizations of Polish entities.
Let’s talk
For a deeper discussion of how this might affect your business, please contact:
International Tax Services, United States
Elena Liaskovskaia
+1 (646) 471-5515
[email protected]
International Tax Services, Poland
Agata Oktawiec
+48 22 746 4864
[email protected]
Stay current and connected. Our timely news insights, periodicals, thought leadership, and webcasts help you
anticipate and adapt in today's evolving business environment. Subscribe or manage your subscriptions at:
pwc.com/us/subscriptions
© 2016 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to
the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
SOLICITATION
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
PwC United States helps organisations and individuals create the value they’re looking for. We’re a member of the PwC network of firms in 157 countries with more than
195,000 people who are committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com
3
pwc