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Tag: CIT

Submission of the CIT and PIT returns

 

Beginning from January 2015 submission of PIT and CIT returns may by only in electronically way. The only exception from this obligation is provided only for the entrepreneurs which have less than 5 employees.

Special Economic Zones in Poland – increasing the investment attractiveness of Poland and the opportunity to use the entire area of SEZ is the main goal of SEZ functioning extending to 2026, the Council of Ministers adopted on July 23rd 2013, 14 regulations implementing this provision.

 

Special Economic Zones (SEZs) are designated areas within Poland established to create a more favorable business environment for investors. There are currently 14 SEZs located all over the country, offering tax incentives and a well-developed infrastructure. The income from business operations conducted within a SEZ may enjoy a corporate income tax (CIT) exemption.

 

The Ministry of Finance prepared May 8th 2013 the project of changes regarding CIT and PIT Acts introducing taxation in Poland on income of foreign companies –  the so called Controlled Foreign Corporations. Income from financial and non-financial business activity of given foreign company would be taxed wit 19% tax rate in the case if at least half of their income were passive income.

The planned change will affect foreign companies from countries with lower of at least 25% PIT and CIT rate, compared to Poland, or where foreign earnings are not taxed at all. The planned changes are due to the EU Directive on the common consolidated corporate tax base. In support of this project, the Ministry of Finance exclude the need for changes to international agreements on avoiding the double taxation. The Ministry of Finance is planning to enter into force the above change starting from January 1, 2014.

 

The entities subject to CIT – the corporate income tax in Poland, are as follows:

  • legal persons (in particular: limited liability companies, joint-stock companies, capital companies in organization);

partners being legal persons;

  • foreign partnerships, if in the state where their seat is located they are treated as legal persons and are subject to unlimited tax liability there;
  • tax capital groups. (more…)

An important criterion for the determination of the place of taxation of an income of the person performing the work abroad is the place of residence of that person.

 

According to article 3 paragraph 1 of the PIT Act, individuals being residents of Poland are subject to pay tax on all their revenues regardless of the source of an income (unlimited tax-paying liability). In the paragraph 1a of that article, the person being the resident of the territory of Poland (so-called tax resident) is considered to be one when:

 

– has here a personal or economic interests center (center of vital interests) or,

– is staying here longer than 183 days in a fiscal year.

 

Country of the personal and economic interests must be understood as a country with which the employee has closer personal and economic relations. In practice, this is a country where a person has always lived and worked, also where the family of that person lives, and where he has his assets. As a general rule, according to the polish provisions, income of a polish tax resident is taxed in Poland.

 

It should be noted that important are the agreements between the countries. Mostly, however, the country where the employee works, is interested in taxation of the revenue from such work. In that situation the rules governing the avoidance of double taxation apply. Generally it is described by a situation, when a Polish tax resident, formally employed by the company established in Poland, carries out his work in another country, still being a Polish tax resident.

The rule is that Polish limited liability company, which are a part of international groups are being funded by foreign related entities. Depending on the form there will be different tax consequences of receiving these funds.

There is an option of financing with equity, meaning increasing the initial capital or supplementary capital by cash contribution and also the possibility of debt financing.

Financing with equity allows the neutral from the perspective of the corporate income tax (CIT) providing of financial resources to the Polish company. The amount of income received for the establishment or increasement of share capital is not a tax income for a company. This principle also applies to payments contributed to the company and the amounts and values being excess of the issue value over the nominal value of shares or stocks (called agio).

Regarding the debt financing the most common method is a loan. A similar financial effect can be achieved by acquisition of newly issued debt securities (such as bonds) or by cash-pool financing. Since the above issue might be complicated please contact us before choosing the most effective method of increasing the capital of your company.

In order to explain the difference between an agent of a dependent status and an agent of an independent status we need to provide explanation of a permanent establishment first.

The term permanent establishment – according to the CIT Act – means a fixed place of business through which the entity having a seat or management on the territory of a given country, wholly or partially carries on business of the enterprise on the territory of another country.

  (more…)