NEWSLETTER
No. 33 March 2024
Malinowski & Associates. Legal Advisors. Partnership
Table of contents
The mandatory National e-Invoicing System will not enter in 2024.
Reasons for postponing the introduction of mandatory KSeF.
When will the mandatory KSeF begin?
Deductibility of minimum tax from “classic” CIT.
Who is affected by the new tax ?
Who is not covered by the minimum tax?
Exclusions in determining profitability
Additional tax on housing purchases.
Sixth apartment and another with additional tax.
Purchase of a residential unit by several buyers.
Mandatory National e-Invoicing System will not enter in 2024
Introduction
The National e-Invoice System, which allows the issuance and sharing of structured invoices, was introduced in 2022. Currently, the use of the National System
E-invoicing is a voluntary solution and depends on the decision of the entrepreneur, but on July 1, 2024. this was about to change. It was planned to introduce a mandatory National e-Invoicing System for businesses that are VAT payers, and at a later date for others. From then on, entrepreneurs were to settle exclusively through the system. KSeF aims to eliminate paper invoices in the first place.
Reasons for postponing the introduction of mandatory KSeF
Many entrepreneurs and experts have called for a delay in the implementation of the mandatory e-Invoicing system. According to the Ministry of Finance, errors have been detected that prevent the introduction of a mandatory KSeF as early as 2024. The main objections concerned technical issues, including system performance. As a result, the Finance Ministry on January 19 announced its decision to postpone the introduction of a mandatory e-Invoicing system. It was stressed that KSeF will be introduced, but “we can’t afford one day when KSeF doesn’t work as it should ,” and currently such a risk exists, so the decision to postpone KSeF became a necessity.
At the moment, work is being done on improving the operations of the National System
e-Invoices, and an external IT audit is planned for KSeF. The Finance Ministry’s decision will certainly allow taxpayers to better prepare for KSeF implementation.
So when will the use of KSeF become mandatory?
Currently, the specific date of the planned entry into force of the KSeF obligation is not known. The Finance Minister said that it would be possible to know the date only after the results of an audit of the system, conducted with the help of an external entity.
KSeF Consultation
In order to address the questions and concerns of businesses regarding the legal solutions and functionality of the system, the Ministry of Finance has held consultations on the implementation of KSeF. As many as ten thousand people took part. Training will also be held at tax offices on the use of free e-invoicing software. A dedicated hotline is also planned.
Minimum tax for 2024
Introduction
On January 1, 2022, a new taxation method was introduced into the Law of February 15, 1992. on Corporate Income Tax (hereinafter: the “CIT Law”) to establish a 10-percent minimum income tax commonly referred to as the “loss and low income tax.” The minimum tax regulations, due to the deferral the legislature decided on, did not take effect until January 1, 2024. 2024 is therefore the first year for which the new tax will be due. Consequently, the first settlements of this tax are scheduled for 2025.
The minimum tax is to apply to CIT taxpayers who declare too little taxable income or show a tax loss, according to the legislature. It should be noted that the legislature did not intend to impose the tax on entities with low profitability due to their unique nature of operations or temporary circumstances.
The minimum tax will be settled in the annual tax return. In practice, therefore, the minimum tax will have to be paid after the end of the year if it turns out that the tax calculated under the general rules is lower than the amount of the calculated minimum tax.
Deductibility of minimum tax from “classic” CIT
This is a parallel form of taxation in addition to the so-called “taxation”. “classic” CIT. In fact, it may happen that a CIT taxpayer will have a tax liability for traditional CIT and minimum tax at the same time in one year. Nevertheless, this should not lead to double taxation, since the amount of minimum tax to be paid can be reduced by the CIT due in the traditional form. Importantly, if the taxpayer pays the minimum tax, he will be able to deduct it from his CIT in the following 3 tax years in his tax returns.
Who is affected by the new tax ?
According to Article 24ca of the CIT Law, the 10% minimum tax will be subject to:
- tax capital groups (CAGs)
- Companies that have their registered office or management in Poland (limited liability companies, joint stock companies, simple joint stock companies, limited partnerships, limited partnerships, limited joint-stock partnerships, and under certain conditions general partnerships whose partners are not exclusively natural persons)
which incur losses in their operating activities or have a certain low profitability ratio (less than 2%). Thus, the ratio of income to revenue is important. If it is less than 2%, the entrepreneur will pay the minimum tax.
However, it is important to remember that simply falling into any of the categories mentioned does not automatically imply an obligation to pay the minimum tax. It will be necessary in this regard to determine the tax result of the entity in question.
The minimum tax may apply to non-residents who conduct business in Poland through an establishment. This new method of taxation will apply to those entities to the extent that their income and any losses are attributable to the operation of such an establishment.
Who is not covered by the minimum tax?
The minimum tax will not apply to non-corporate entities within the meaning of the Corporate Income Tax Act (CIT) operating on the basis of the so-called “minimum tax”. separate laws such as cooperatives, foundations, associations or Independent Public Health Care Institutions. Currently, small CIT taxpayers with annual gross sales revenues of less than €2 million, as well as start-up taxpayers – in the year of start-up and in the following two tax years – are also excluded from the minimum tax provisions.
The minimum tax will also not be paid by companies whose partners are exclusively PIT taxpayers, i.e. Civil partnership, partnership, general partnership, which are subject to PIT due to the organizational subjectivity of their shareholders.
The minimum tax does not apply to personal income taxpayers who are taxed in the form of a lump sum, according to the tax scale or a flat tax, and for this purpose kept a tax income and expense ledger, but also when they were required to keep full books of account.
A key category of entities exempt from paying the minimum tax is corporate income tax (CIT) taxpayers who are in the early stages of their business activities. The assumptions of the law indicate that this could include start-ups, newly created companies by existing Polish companies, as well as companies that are starting up in Poland. The tax exemption will apply for the first three years of operation. In practice, the minimum tax will apply to new CIT taxpayers in the 4th year of operation at the earliest.
Also excluded from the minimum tax are CIT taxpayers who earned at least 30% less revenue in a given year compared to the previous year. This means that simply earning a lower income or incurring a loss will not always result in a minimum tax. A comparison of revenues with the previous year will still be necessary for a full assessment. If a year-on-year comparison establishes a decrease in revenue of at least 30%, the minimum tax will generally not occur.
Exclusions in determining profitability
Typically, the reason for the loss or low profitability is not due to tax optimization efforts, but rather due to day-to-day management decisions or cost increases. Taking this into account, the legislator has developed a list of costs and revenues that should be systematically ignored when calculating profitability (tax result). In general, when calculating tax loss and tax income (to determine the proportion of income to income) in the context of the minimum tax, it will not be necessary to include the following:
- Costs from the acquisition, construction or improvement of fixed assets (e.g., depreciation);
- costs from the use of fixed assets under a lease agreement, if depreciation is made by the lessee (finance lease);
- Costs from payments under the operating lease agreement;
- income and expenses related to transactions that are subject to regulated prices, provided that the taxpayer has either incurred a loss on these transactions or its “profitability” has not exceeded 2%;
- Revenue and expenses from the disposal of trade receivables to factoring companies;
- an increase in deductible expenses for the purchase of electricity, heat or line gas (with the assessment of the increase in expenses to be made on an annual basis);
- Certain taxes and fees paid, i.e. Excise tax, retail sales tax, gaming tax, fuel surcharge and emission fee;
- the amount of excise tax that is included in the price of excise goods bought and sold by the taxpayer trading in these goods;
- 20% of deductible expenses for wages, social security contributions and contributions to employee capital plans (PPKs).
It is worth noting that the introduced regulations include, among other things, a special method of loss calculation, introduce a number of hitherto unknown exceptions for various groups of taxpayers, as well as require a detailed determination of the tax base. This implies a requirement for a preliminary analysis of the regulation in terms of inclusion among those subject to the minimum tax.
Additional tax on housing purchases
Introduction
Tax rates on civil law transactions depend on the type of activities carried out. Currently, according to the provisions of the Law on Tax on Civil Law Activities, the acquisition of real estate is subject to civil law activities tax on the part of the purchaser. Tax liability occurs at the time of execution of a civil law transaction, that is, the conclusion of a contract through a notarial deed. The market value of the property is the tax base, with a tax rate of 2%. The tax is collected and paid to the tax office by the notary, who in this case acts as the payer. In contrast, in the primary market, i.e. when buying from a developer, there is no transfer tax, but instead we pay VAT, which is included in the price of the apartment.
The PCC tax on the purchase of an apartment, land or house can come at different rates:
- 0% – if this is a first-time property purchase,
- 2% – if the buyer buys a consecutive property or the property being purchased does not meet the objectives of the PCC exemption law,
- 6% – if the buyer buys more than 6 apartments in one development.
Sixth apartment and more with additional tax
On Jan. 1, 2024, new regulations went into effect regarding the higher rate of the real estate transfer tax (PCC) for the purchase of more than five apartments by one person. The changes involved the introduction of an increased rate of tax on civil law transactions applicable to contracts for the sale of residential units. From then on, in such a situation, the buyer is charged a 6% tax rate. Moreover, buyers must now pay two taxes – VAT and an additional PCC. The aim of this solution is to curb real estate speculation and to balance against local governments the tax benefits that accrue to those who purchase their first apartment. It is worth noting that the tax on civil law transactions is an own revenue for local government units.
This change was introduced by Art. 7a paragraph 1 of the Law on Tax on Civil Law Activities (PCC). According to Art. 7a para. 1 ww. Act, if the buyer:
- acquires at least six apartments, which are separate properties, located in one or more buildings on the same plot of land, subject to VAT (or shares in these apartments), or
- has already acquired at least five such apartments (or shares in them),
the tax rate on the contract for the sale of the sixth and each subsequent apartment (or share in an apartment) with the same buyer is 6%.
It is worth noting that the situation in question relates to the acquisition of residential units built on a single piece of land. If there are several apartment blocks on one site, and the same purchaser acquires at least a total of 6 apartments in each block, he will be subject to the new tax.
It should be noted that if the same purchaser acquires at least 6 residential units, but they are located on different land parcels (for example, in different towns), the tax in question on multiple dwellings will not apply.
Purchase of a dwelling by several buyers
If the acquisition of a residential unit constituting separate property is made for joint ownership by several buyers, the 6% rate will also apply if at least one of the buyers is liable to pay tax at such a rate. In such situations, the joint and several obligation to pay the tax on civil law transactions will be borne only by purchasers who meet the criteria listed in Art. 7a para. 1 of the Law on Tax on Civil Law Activities. Other buyers will not be required to pay this tax.
PCC tax vs. VAT
One of the significant changes introduced by the amendment to the Civil Law Activities Tax Law is the violation of the previous division between civil law activities tax and VAT. Previously, when the transaction was subject to VAT on the seller’s side, it relieved the buyer of the obligation to pay the VAT. The new legislation introduces simultaneous taxation of transactions with VAT and tax on civil law transactions. According to the new wording of Art. 2(4) of the PCC Law is not subject to taxation on civil law transactions other than the articles of association and amendments thereto to the extent that they are subject to tax on goods and services, with the exception of contracts for the sale of which the object is a residential unit constituting a separate property, taxed in accordance with Art. 7a.
Such a change in the provision means that an exception has been made to the principle of separating VAT and civil law transaction tax. In the case of multiple dwelling tax, the seller’s taxation of the transaction with VAT does not exclude the buyer’s obligation to pay the tax on civil law transactions. As a result, the buyer bears the burden of a 6% tax on civil law transactions and bears the economic burden of VAT, which is not deductible on the personal side.
For example, when an individual purchases 6 apartments in a new building from a developer, the developer will be required to pay VAT on the sale of the apartments (with no exemption available), and at the same time the purchaser will be required to pay a 6% tax on civil law transactions.
The new regulations will not cover PRS (Private Rented Sector) funds, which invest in the acquisition of entire apartment blocks. The purchase of a building without separate residential units will not be subject to an additional 6 percent tax. tax on civil law transactions, even if dozens or hundreds of apartments are acquired as part of the transaction. For individual investors, on the other hand, buying in different locations may be a way to avoid additional taxation.
