As part of the Polish Deal, the Ministry of Finance intends to limit the possibility of settling as a CIT cost remuneration paid by companies to their partners and persons associated with them as of 1 January 2022.
In the justification for the draft amendment, the Ministry of Finance indicates that it wants to counteract the phenomenon of paying the so-called hidden dividend.
According to experts, including Krzysztof Burzyński, a tax advisor and partner at BTTP, the proposed reform seems unnecessary in a situation where Polish tax law currently contains regulations on transactions between related entities. Tax authorities can already control commercial contacts between individual companies and their partners, and make corrections if irregularities are found.
The Ministry of Finance, in its justification for the bill, provides examples of the forms that a hidden dividend may take. These include:
- payment unrelated to business activity;
- non-market transaction;
- excessive indebtedness of the company for various reasons towards its related entities from capital groups;
- the use by the company of assets belonging to a partner or related entities that originally belonged to the taxpayer.
Payments will not be included in tax deductible costs if:
- the transaction on the basis of which the payment is made is of a non-market nature; or
- if there was no payment to the partner or related persons, the company would have a net profit within the meaning of the accounting regulations for the financial year in which the payment was included in the financial result
The list of services excluded from tax costs is open and may include remuneration for various benefits for the company. These may include, among others, services:
- advisory;
- rental of real estate (e.g. offices, warehouses, factory halls);
- rental of movable property (e.g. machinery).
According to Krzysztof Burzyński, the project itself requires further clarification, especially in the case of the second condition assuming the exclusion from tax costs of payments, the failure to pay which would result in a net accounting profit.
Article in Dziennik Gazeta Prawna:
