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Significant changes in taxation coming into effect in 2021 will make 2020, the year they were enacted, memorable not only due to the SARS-CoV-2 outbreak. Many in the Polish business community may remember 2020 for the unexpected and sudden decision to impose CIT on limited partnerships; while for Poles paying taxes in Poland and earning income abroad, it will be the elimination of tax relief on income earned abroad (the so-called abolition relief).

What are we in for in 2021 with regard to taxes?

The epidemic deferred the introduction of some changes in tax settlements and delayed many responsibilities, but not to such an extent that you could stop thinking about them in 2020 and with the upcoming 2021.

We have put together for you what we see as the most crucial tax changes which entered into effect in the second half of 2020 or will do so from the beginning of 2021 or during the year.

Should you be interested in finding out more about a given subject, we encourage you to contact our tax advisers.

Changes in taxes for 2021: the GOOD NEWS

(Read all or click on subject of interest)

 

1. Estonian CIT – flat rate tax on company income

As of 01 January 2020, limited liability companies and joint-stock companies can choose to pay a flat rate tax on their income as an alternative to traditional CIT. The fundamental advantages of this solution include the delay of taxation until such time as profits are paid out, fewer obligations with regard to documentation and the possibility of lowering the effective tax rate from the shareholder’s point of view.

The Estonian CIT is intended for small and mid-sized undertakings with a turnover under PLN 100 million, which:

  • operate as limited liability companies (sp. z o.o.) or joint-stock companies (S.A.) and whose shares are held exclusively by natural persons,
  • do not hold shares in another company, or the entirety of the rights and obligations in a partnership,
  • whose passive income does not account for 50% or more of revenues,
  • have 3 or more employees (with an exception provided for start-ups),
  • incur specified capital expenditure on physical assets classified under groups 3-8.

During the period of application of the flat rate tax, the taxpayer is not eligible for tax relief entitlements or carrying forward losses from a prior year.

Two-tier taxation will still apply:

  • Flat-rate CIT at the time of transfer to shareholder (15% or 25%) and
  • PIT from individuals on dividends.

However, it will be possible for the shareholder to deduct from the dividend a portion of the tax paid at the company level (CIT), so as to achieve total taxation at:

  • 25% for small taxpayers (which can be reduced by 5% for significant investment outlays)
  • 30% for all others (which can be reduced by 5%).

Importantly, however, not all transfers to shareholders will qualify for the deduction. The decision to apply the flat rate tax should always be preceded by a thorough cost-benefit analysis.

For more information, refer to our Purple Guide on Estonian” CIT – see if you stand to gain.[polish version]

Do you have any questions or concerns? Contact our expert! Małgorzata Samborska, tel. +48 661 538 580, malgorzata.samborska@pl.gt.com

2. 9% CIT

As of 01 January 2021, the limit of revenues qualifying for the 9% corporate income tax (CIT) rate goes up to EUR 2m from the currently applicable EUR 1.2m. As before, the tax rate will be available to small taxpayers and those starting business from the first year of operations (there is no change in the revenue limit to be recognised as a small taxpayer – EUR 2m in sales including output VAT in the previous tax year). Please note that the 9% tax rate can be applied to income other than capital gains.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Dariusz Gałązka, tel.  +48 605 828 912, dariusz.galazka@pl.gt.com

3. Tax exemption in PIT/CIT on income from buildings

In light of the continuing epidemic, the legislator decided to extend the period of exemption from the tax on income from buildings, provided for in article 24b of the CIT Act and article 30g of the PIT Act.

The exemption introduced in article 38ha of the CIT Act and article 30g of the PIT Act as part of the package of anti-crisis solutions in connection with the SARS-CoV-2 epidemic, initially applicable from 01 March 2020 to 31 December 2020, has now been extended to include the period from 01 January 2021 up to the end of the month during which the state of epidemic will be ended, as long as the state of epidemic introduced due to COVID-19 continues after 31 December 2020.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 December 2020

Do you have any questions or concerns? Contact our expert! Katarzyna Ciesielska, tel. +48 601 723 540, katarzyna.ciesielska@pl.gt.com

Check Tax advisory services Grant Thornton

4. Flat rate income tax on registered income

The amended provisions of the act on flat rate income tax on certain income derived by natural persons significantly expand the spectrum of individuals who will be able to take advantage of the simplified income tax regime from the new year.

Importantly, the catalogue of liberal professions has been expanded to include e.g. psychologists, physiotherapists, advocates, notaries, attorneys-at-law, architects, statutory auditors, tax advisers and many others who will be able to pay their taxes at the flat rate. Additionally, the legislator has removed the statutory provision whereby flat rate tax was only available to those taxpayers practising liberal professions who provided services to entities not involved in business activities. From the new year, flat rate taxpayers practising liberal professions will also be able to provide services to sole proprietors for the purposes of their business activity, as well as legal persons and organisational units without corporate status.

It is also worth mentioning that the limit on annual revenues to qualify for flat rate taxation for natural persons who are sole proprietors or do business within the framework of a civil-law partnership or a general partnership is going up. The amendment raises the threshold from EUR 250k to EUR 2m.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Aleksandra Trocińska, tel +48 785 119 098, aleksandra.trocinska@pl.gt.com

5. Notional interest in CIT settlements

As of 2019, the CIT Act provides for a previously unknown option in Polish tax law – to treat notional interest on equity as tax deductible – with respect to profits and additional contributions allocated to the taxpayer’s supplementary capital.

The tax deduction depends on the amount of profits retained in the business or additional contributions brought into it, and is determined by multiplying the above figure and the reference rate of the National Bank of Poland applicable on the last working day preceding the tax year increased by 1 percentage point. The tax deductible amount to be recognised in the taxable income for the given tax year may not exceed PLN 250,000.

Please note that as of 01 January 2021, following a revision of statutory provisions, the deduction does not apply if the taxpayer or its related entity effected a legal transaction or a series of related legal transactions without real economic substance, mainly for the purpose of taking advantage of the deduction. This brings the above clause in line with many others already in place in the CIT Act.

Effective as of: 01 January 2020 (with respect to recognition in tax returns).

Do you have any questions or concerns? Contact our expert! Dariusz Gałązka, tel.  +48 605 828 912, dariusz.galazka@pl.gt.com

6. Quick fixes

On 01 July 2020, several regulatory changes, colloquially referred to as the “2020 quick fixes”, came into effect. Essentially, these are new rules concerning call-off stock arrangements, chain transactions and the application of the 0% rate in intra-Community supply of goods (ICS).

Call-off stock arrangements

The first change refers to the so-called call-off stock warehouses (consignment warehouses). The establishment of such a warehouse in Poland does not entail the obligation of domestic registration in connection with the movement of goods to the warehouse, and the tax obligation related to the delivery will only arise at the time of transfer of the right to dispose of the goods as owner (essentially: when the goods are picked up from the warehouse by the buyer).

Previously, the operation of consignment warehouses was subject to strict formal conditions, which meant that not many entrepreneurs used them.

Under the amendment, the goods picked up from a call-off stock warehouse may be intended for commercial purposes (which was not allowed before), and the warehouse can also be operated by a third party. The amended regulations also provide for the option of replacing the buyer of the goods transferred to the warehouse during the storage period. The maximum period of storage prior to delivery to the buyer has been shortened to 12 months.

Chain transactions

Chain transactions without a doubt make for some of the most interesting, but also most difficult cases to interpret in light of the VAT Act, and their correct recognition in VAT returns requires a thorough analysis of the entire transaction process.

In consideration of the above, the changes in the VAT Act with respect to chain transactions need to be viewed in a positive light. The legislator has introduced the definition of the so-called intermediary operator and assumed that transport in the supply chain will as a general rule be ascribed to the supply made to that entity. As an exception, the intermediary operator may provide their supplier with the identification number for intra-Community transactions issued to them by the member state from which the goods are dispatched or transported. In such a case, the transport (regarded as an intra-Community supply and acquisition of goods) will be ascribed to the supply made by the intermediary.

Please note that the amended provisions only apply to intra-Community transactions – supplies to third countries are still subject to previous rules.

These changes should definitely be regarded as positive for taxpayers.

ICS

New ICS arrangements are related to the introduction of additional conditions for the application of the 0% rate to these supplies. The legislator has made eligibility for the 0% rate conditional on having the buyer’s EU VAT identification number, but also on indicating this number to the supplier. Moreover, eligibility for the 0% rate on ICS is conditional on submitting a correct recapitulative statement.

Please note as well that 01 January 2020 was the effective date of the VAT Implementing Regulation, which determines how ICS are to be evidenced to qualify for the 0% rate. The Implementing Regulation provides a list of the documents which may be furnished as evidence of dispatch or transport of goods to another member state of the European Union. At the same time, the new regulations do not altogether eliminate the other forms of ICS documentation. What is more, the EU provisions introduce the concept of presumption that an ICS took place, which may only be rebutted by a tax authority in the course of an inspection by presenting relevant evidence indicating that an ICS took place.

It should also be emphasised that even though the Implementing Regulation has come into effect, with the new approach to documenting intra-Community transactions, the provisions of the VAT Act are still binding in this respect. Therefore, in our opinion, it should be assumed that the use of documents provided for in the VAT Act should be sufficient to apply the 0% rate.

Legal basis:

  • the Act of 28 May 2020 amending the corporate income tax act, goods and services tax act, act on exchange of tax information with other countries and several other acts (Journal of Laws of 2020 item 1106) amending the above act as of 01 July 2020
    Effective as of: 01 July 2020
  • Council Implementing Regulation (EU) No 2018/1912 of 04 December 2018 amending Implementing Regulation (EU) No 282/2011 as regards certain exemptions for intra-Community transactions

Do you have any questions or concerns? Contact our expert! Dominika Dobek, tel.  +48 693 332 618, dominika.dobek@pl.gt.com

7. Changes in accounting for import of goods using simplified procedures

As of 01 July 2020, the simplified procedures of accounting for import of goods have been amended. Up to 30 June 2020, simplified VAT accounting on imports (accounting for output VAT within the tax return) was available only to those taxpayers who imported goods under specified customs procedures. As of 01 July, it is possible to account for VAT directly in the tax return on all imports of goods, i.e. those cleared under simplified customs procedure and those subject to the general conditions. The amendment also introduced other simplifications, e.g. the obligation to submit statements/declarations to a single authority, not as before to all before whom the import was made.

Please note as well that following the amendment to the VAT Act introduced on 01 October 2020 regarding the obligation to submit the new SAF-T (JPK), the obligation to present documents confirming settlement of VAT on imports was lifted with respect to importers settling VAT on imports directly in the tax return.

Legal basis:

  • the Act of 31 July 2019 amending several acts to reduce regulatory burdens (Journal  of Laws of 2019 item 1495)

Effective as of: 01 July 2020

  • the Act of 04 July 2019 amending the goods and services tax act and several other acts (Journal of Laws of 2019 item 1520)

Effective as of: 01 October 2020

Do you have any questions or concerns? Contact our expert! Dominika Dobek, tel.  +48 693 332 618, dominika.dobek@pl.gt.com

8. SLIM VAT

Several changes in the VAT Act have been planned for 2021, intended to simplify or facilitate VAT reporting. These include:

  • simplification in correction invoices, notably waiver of the obligation to obtain confirmation of receipt of the correction invoice;
  • facilities for exporters – extension of the deadline in the exportation of goods from two to six months to qualify for the 0% rate, intended to solve the problem of long-term supplies;
  • facilities with regard to exchange rates – taxpayers can apply the same rules of currency conversion to VAT as for calculation of income tax and keep them for at least 12 consecutive months;
  • extension of deductibility of input VAT from three to four months;
  • the right to deduct input VAT from invoices for the purchase of accommodation services for resale, i.e. accommodation bought for business clients.

Legal basis: draft Act of 27 November 2020 amending the goods and services tax act and several other acts

Effective as of: 2021

Do you have any questions or concerns? Contact our expert! Dorota Borkowska-Chojnacka, tel.  +48 661 538 554, dorota.borkowska-chojnacka@pl.gt.com

9. Robotisation tax relief

The update of the National Reform Programme (NRP) heralds the introduction of a new incentive measure for enterprises, in the form of tax relief related to investments in automation and robotisation in the taxpayers’ business (robotisation relief). According to the announcement from the Ministry of Finance, the robotisation tax relief should apply as of Q2 2021.

Robotisation relief is intended as a tax incentive available to all entities subject to income tax. At the same time, eligibility for the relief will not depend on the business sector in which the enterprise operates or business size, making this solution available to all. The new tax relief will operate in a similar manner as the existing research & development tax relief (R&D relief), enabling taxpayers to make an additional deduction of eligible costs (expenses detailed in an exhaustive list) from the tax base. Within the framework of robotisation relief, it will be possible to deduct 50% of the above eligible costs.

According to the draft, the relief will apply within a specific time frame. It has been announced that the relief will apply to expenses incurred on business robotisation and automation in the years 2021-2025. The deductions can be made in the years indicated above, and in the six consecutive years thereafter. It means that the last deductions of eligible expenses can be made in 2031.

Legal basis:

Effective as of: Q2 2021

Do you have any questions or concerns? Contact our expert! Michał Rodak, tel.  +48 661 538 594, michal.rodak@pl.gt.com

Check Tax advisory services Grant Thornton

1. Extension of CIT to limited partnerships and general partnerships

As of 2021, limited partnerships and general partnerships whose members are not exclusively natural persons will become subject to CIT. This change in the taxation of partnerships was hotly debated recently, only to become reality on 30 November 2020.

With respect to limited partnerships, the legislator provided an option of deferral of the change of the limited partnership status up to 30 April 2021, leaving this decision to the limited partnership, or de facto the limited partner’s management or partners. Unfortunately, the provisions fail to indicate how the limited partnership is to express its decision. This is one of several problems to be faced by limited partnerships and their members. Likewise, there is considerable uncertainty with respect to the issues of closing books of accounts or changing business year-end, which affects not only tax affairs, but also the obligations arising from the Accounting Act.

With regard to general partnerships, these will become CIT taxpayers as of 01 January 2021, unless by 31 January 2021 the head of the tax office competent for the registered office of the general partnership as well as the heads of the tax offices competent for each taxpayer earning income from the partnership receive information, on a prescribed form, concerning the taxpayers subject to corporate income tax and personal income tax, entitled to sharing in the profits of the partnership, whether directly or indirectly through entities which are not subject to income tax.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions related to your partnership? Contact our expert! Grzegorz Szysz, tel. +48 661 530 233, grzegorz.szysz@pl.gt.com

2. Taxation of sale of a real estate company

Under the existing provisions, tax in Poland is applied to the disposal by a non-resident of shares or the entirety of the rights and obligations in a partnership if 50% or more of the value of the assets of such a company/partnership is comprised, directly or indirectly, of real estate situated in Poland or interests in such real estate. Provisions regulating the taxation of such transactions in Poland apply in conjunction with statutory provisions regarding the avoidance of double taxation.

As of 01 January 2021, a new legal basis has been introduced into the CIT Act with respect to the taxation of disposal of shares in a company or the entirety of the rights and obligations in a partnership. As a consequence, the CIT Act now provides for two legal bases for the taxation of such transactions. Under the new provisions in the CIT Act, the disposal of the so-called real estate company by a non-resident will be subject to taxation in Poland. The real estate company is an entity other than a natural person, obliged to draw up the balance sheet in line with the provisions of the Accounting Act, where:

  • A – on the first day of the tax year, and in the case where the real estate company is not subject to income tax – on the first day of the business year, 50% or more of the market value of assets was made up of, directly or indirectly, the market value of real estate situated in Poland or interests in such real estate, and the market value of such real estate exceeded PLN 10,000,000 or the equivalent thereof determined according to the mid-market exchange rate of foreign currencies announced by the National Bank of Poland as of the last working day preceding the first day of the tax year – in the case of entities starting operations,
  • B – as of the last day of the year preceding the tax year, and in the case where the real estate company is not subject to income tax – as of the last day of the year preceding the business year, 50% or more of the balance-sheet value of assets was made up of, directly or indirectly, the balance-sheet value of real estate situated in Poland or interests in such real estate, and the balance-sheet value of such real estate exceeded PLN 10,000,000 or the equivalent thereof determined according to the mid-market exchange rate of foreign currencies announced by the National Bank of Poland as of the last working day preceding the last day of the tax year preceding respectively the tax or business year and in the year preceding respectively the tax or business year, tax revenues, and in the case where the real estate company is not subject to income tax – revenues recognised in net profit/loss arising from rental, subrental, lease, sublease and other agreements of a similar nature or from transfers of ownership with respect to real estate or interests in real estate, as referred to in article 3(3)(4) and arising from shares in other real estate companies accounted for 60% or more of the overall tax revenues or, respectively, revenues recognised in net profit/loss – in the case of entities other than those described in point a) above.

The difference between the disposal of a company where 50% or more of the value of assets is comprised of real estate or interests in real estate and a real estate company is that in the case of the real estate company it will act as the remitter, which means that it will be obliged to collect the tax from the non-resident amounting to 19% of the income earned from the sale. In the case where the real estate company is not privy to the particulars of the transaction, it will be obliged to collect and pay tax amounting to 19% of the market value of the disposed shares, or the entirety of rights and obligations.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Katarzyna Ciesielska, tel. +48 601 723 540, katarzyna.ciesielska@pl.gt.com

3. Taxation of assets of a liquidated company

As of 01 January 2021, in the event of company liquidation where, as a result of the liquidation, assets other than cash are transferred to the shareholders of that company, such a company (or its shareholders in the case of tax-transparent companies) will be obliged to recognise revenue amounting to the value of liabilities arising from the distribution of assets among the shareholders of the liquidated company. Please note that if the value of the liability is lower than the value of the asset, revenue should be recognised at the market value of the benefit in kind. When determining the income from these operations, the company will account for tax costs, not recognised in tax returns and related to the asset items transferred to shareholders within the framework of the liquidation. Prior to the change in regulations, the above rule was often a matter of dispute between taxpayers and tax authorities and in the majority of cases it was not upheld by administrative courts.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Dariusz Gałązka, tel.  +48 605 828 912, dariusz.galazka@pl.gt.com

Check Tax advisory services Grant Thornton

4. Prohibition on reducing depreciation rates

Under the currently applicable provisions of the PIT Act and the CIT Act, taxpayers have the right to increase or decrease the depreciation rates applied to individual fixed assets. As of 01 January 2021, this right will no longer apply to the depreciation of fixed assets used by taxpayers in business activities generating income exempt from income tax – during the period of using such an exemption. This change is intended to restrict the possibility of optimising depreciation write-offs while the taxpayer is taking advantage of the tax exemption, and will apply to fixed assets entered into the fixed asset account after 31 December 2020, meaning that less income can be subject to the income tax exemption and the exemption will take longer to exhaust, in extreme cases – leading to tax losses.

Legal basis: the Act of 28 November 2020 amending the personal income tax act, corporate income tax act, act on flat rate tax on certain income derived by natural persons and several other acts (Journal of Laws of 2020 item 2123).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Łukasz Kempa tel.  +48 693 141 146, lukasz.kempa@pl.gt.com 

5. Retail sales tax

The act on the tax on retail sales formally entered into force on 01 September 2016, but its application was postponed several times due to the ongoing proceedings regarding its compatibility with EU law on state aid. In her Opinion delivered on 15 October 2020 (Case C‑562/19), CJEU Advocate General Kokott held that the Polish tax on the retail sector does not violate EU law with regard to state aid. While the Court of Justice of the European Union has not issued a judgment in this case to date, the application of provisions on the retail sales tax will not be postponed any longer. According to the currently applicable version of the act, its provisions apply to revenues from retail sales generated as of 01 January 2021.

Retail sales tax is collected from retailers, that is entities doing business in Poland involving the disposal of goods to consumers against payment by contract made on the business premises or off the business premises within the meaning of the act on consumer rights (excluding certain categories of goods, such as solid fuels, medications, foodstuffs for special nutritional purposes and medicinal products reimbursed out of public funds).

The tax will be levied on revenues from retail sales exceeding the cap of PLN 17m in a given month. The revenue from retail sales will be determined on the basis of sales records evidenced using cash registers and non-evidenced sales (when taking advantage of the exemption from the obligation to evidence sales using cash registers). The revenue from retail sales does not include output tax on goods and services (VAT). The revenue generated in a given month is reduced to account for the amounts paid out due to goods returns after deducting the tax on goods and services.

Two tax rates have been provided for:

  • 0.8% of the tax base – applicable to the portion of the tax base up to PLN 170m,
  • 1.4% of the tax base surplus over PLN 170m – applicable to the portion of the tax base exceeding PLN 170m.

The retail sales tax will be payable on a monthly basis, up to the 25th day of the month following the month to which the tax applies. Along with the payment of tax, taxpayers will have to submit a relevant tax return.

Legal basis: the Act of 06 July 2016 on retail sales tax (Journal of Laws of 2020, item 1293).

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Karol Witkowski tel.  +48 885 887 144, karol.witkowski@pl.gt.com

6. Sugar tax – food levy

The beginning of 2021 marks the entry into force of provisions governing the determination and collection of the levy on beverages with added sweeteners (the food levy – colloquially referred to as “sugar tax”).

The new regulations apply to placing on the Polish market beverages with added sugars in the form of monosaccharides and disaccharides, as well as foods containing these substances, sweeteners, caffeine and taurine. In principle, the tax will apply to the undertakings placing such beverages on the market, i.e. effecting the sale to the first retail outlet. Exemptions have been provided for items like medicinal products, dietary supplements and excise goods (within the meaning of separate provisions). The amount levied depends on the content of sugar or sweetener. It is also affected by the content of caffeine or taurine.

Importantly, the law provides for severe sanctions if the levy is not paid on time – an additional levy equivalent to 50% of the original amount due.

Legal basis: the Act of 14 February 2020 amending several acts with a view to promoting healthy consumer choices (Journal of Laws of 2020 item 1492)

Effective as of: 01 January 2021

Do you have any questions or concerns? Contact our expert! Dominika Dobek, tel.  +48 693 332 618, dominika.dobek@pl.gt.com

7. WHT – new/old obligations as of 2021?

Following the 2018 amendments to the PIT Act and the CIT Act, the tax regulations included an obligation for remitters, initially to be imposed as of 2019, to collect flat rate income tax at the maximum tax rate, in the case of specific payments provided for in income tax laws made to non-residents in excess of PLN 2m during a tax year. The above obligation has already been deferred multiple times, with the most recent postponement up to 31 December 2020 justified by the consequences of the SARS-CoV-2 pandemic.

As a reminder, in the case of payments in excess of PLN 2m it is generally impossible to apply preferences arising from the PIT and CIT Acts or the relevant treaties on the avoidance of double taxation. However, tax regulations do provide for certain exemptions from the general rule, such as a statement of eligibility or an opinion on applying the exemption.

Please note however that any potential further deferral of these obligations will not affect having to exercise “due diligence” when verifying foreign entities, including the requirement by tax authorities to verify the beneficial owner status of the recipient of the amount.

Do you have any questions or concerns? Contact our expert! Małgorzata Samborska, tel. +48 661 538 580, malgorzata.samborska@pl.gt.com

8. Discontinuation of the abolition relief

As of 01 January 2021, individuals working abroad may have to pay higher taxes. This is because they will no longer be able to take advantage of the so-called “abolition relief” in the previously applicable form. The relief had made it possible for Polish tax residents working abroad to avoid paying “additional” taxes on their income from abroad, in a situation where the tax in the country where they worked was lower than that in Poland, and the relevant treaty on the avoidance of double taxation provided for the so-called tax credit method for the avoidance of double taxation.

Problematically, though, Poland has ratified the MLI Convention, which provides for an automatic change of the approach applicable to the avoidance of double taxation, from exemption with progression to tax credit. Consequently, people working in many different countries will be affected. Now is the right time for employers posting workers abroad to introduce appropriate changes into their internal secondment procedures, or where there are none, to consider implementing the relevant internal rules.

Do you have any questions or concerns? Contact our expert! Michał Rodak, tel. +48 661 538 594, michal.rodak@pl.gt.com

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