Warsaw, 26th October 2018
Commentary of the Union of Entrepreneurs and Employers on the adoption by the Polish Sejm of the Act introducing the third income tax threshold and eliminating the flat tax for business and the introductory law of the so-called exit tax
On 23rd October 2018, the Sejm of the Republic of Poland voted on and adopted the government bill amending the act on personal income tax, the act on income tax for legal persons, the act – Tax ordinance and some other acts (document no. 2860) and the government bill on the Solidarity Support Fund for the Disabled (document no. 2848).
Both projects were subject to thorough criticism of many participants of public consultations, including ZPP – the Union of Entrepreneurs and Employers. The first of them assumes the introduction to the Polish tax system of a number of changes of very important character for business entities related to, among other things, the issue of reporting tax schemes or changes related to the tax law circumvention clause. With these are actions, the legislators intended to tighten the tax system and increase the budget revenues, but in practice they may be dangerous for taxpayers. Moreover, as part of the project, the legislator introduces the so-called exit tax, according to which income from unrealised profits would be taxed. This means a de facto taxation of an asset transfer out of Poland, as a result of which the Polish state loses in whole or in part the right to tax income from the sale of this asset, as well as the change of tax residence, as a result of which Poland loses in whole or in part the right to tax income from the sale of an asset owned by the taxpayer in connection with the transfer of his place of residence to another country.
This is a solution resulting, to some extent, from the ATAD directive – however, the Polish legislator decided to implement the provisions in a stricter manner with respect to the minimum requirements set out in the directive, including taxation also for individuals who do not run a business.
It is noteworthy that the adopted project was separated from a larger project, which had previously been the subject of public consultations and contained a number of other solutions, including preferential taxation of income from intellectual property rights or a change in the tax settlement of lease instalments costs. In the course of consultations, the Union of Entrepreneurs and Employers submitted a critical position to the project, highlighting some of the unfavourable solutions, and criticising the fact that the Polish legislator decided to implement the ATAD directive in a hurry, making the consultation process essentially illusory (only two weeks to submit comments to a very extensive project, while consulting the new Tax Ordinance at the same time), although the time for transposition does not pass until the end of 2019. Our position in this respect remains unchanged – we strongly oppose the introduction of the new tax solutions, so deeply interfering with taxpayers’ interests, in such a short time, without taking into account any of the comments made in the course of public consultations, and without an in-depth analysis or discussion of CJEU jurisprudence concerning the exit tax concept and its influence on the final shape of Polish regulations.
During the same plenary session, a second bill was also passed – on the Solidarity Support Fund for the Disabled. This fund is to be financed from contributions levied on employees’ remuneration and a new tax at the rate of 4%, whose taxpayers will be persons with annual income of at least PLN 1 million. It is worth noting that the amount of the said contribution has not been specified in the Act – it is to be determined on an ongoing basis in the Budget Act. In fact, the Polish legislator, under the pretext of creating a new Fund (largely identical with the existing PFRON – State Fund for Rehabilitation of Disabled People), decided to increase non-wage labour costs (what is worse – in the amount not permanently specified in the Act), as well as the liquidation of the linear income tax from business activity and the introduction of a third tax threshold at the level of one million zlotys. The Union of Entrepreneurs and Employers has already strongly criticised this idea several times, pointing to its anti-development character, as well as the danger of introducing far-reaching changes in the future, aimed at creating a progressive system of income taxation in Poland.
To sum up, on 23rd October, the Polish Sejm adopted two bills introducing significant changes that are unfavourable for taxpayers. As is clear from the voting information, unfortunately, only a few MPs opposed these initiatives, which we leave for consideration in the context of the upcoming parliamentary elections.
Fot. Photo RNW/ na lic. Creative Commons/ flickr.com