- Elimination of certain opportunities for aggressive tax planning (in particular, structures allowing for the tax free exchange of assets);
- Introduction of the new system of thin capitalisation restrictions; and
- Introduction of a regime for the taxation of controlled foreign corporations (CFCs).
From the foreign investors' standpoint, the new thin capitalisation regime is certainly the most important item. Until the end of 2014, Polish thin capitalisation restrictions were, in practical terms, irrelevant (the permissible limit of debt-to-equity was 3:1, and even more importantly, in principle only loans provided by direct shareholders were qualified as falling within the scope of thin capitalisation). Therefore, almost all interest paid in respect to loans provided by related parties were fully tax deductible. New shape of this legislation introduces the following features of thin capitalisation:
- Two alternative systems of restrictions are available (the choice is at the taxpayer's discretion);
- The basic system is similar to this existing in the past, however much more restrictive (1:1 debt-to-equity limit instead 3:1, all loans from related parties fall within the scope of new regulations, irrespective of whether the relations between a lender or a borrower are direct or indirect);
- The other system provides that all interest payable on loans (from both related and unrelated parties) may be subject to exclusion from tax deductible costs. However, unlike under the basic system, the factor which is used to decide to what extent interest can be tax deductible is not the debt-to-equity ratio, but the value coming from multiplication of (i) value of assets of a given taxpayer (measured according to the tax regulations) by (ii) basic reference rate of the National Bank of Poland, increased by 1.25%. In practice, this implies that a taxpayer may use large loans from either related or unrelated parties and enjoy the deductibility of interest on them, as long as the interest rate is reasonably low. This system was specifically tailored to the needs of the financial sector (banks, factoring and leasing companies); other entities may theoretically also use it but subject to another limitation, whereby the tax deductible interest cannot be higher than 50% of operating profit.
Very complex CFC regulations (which in the past were not present in the Polish tax system) implement the obligation for Polish taxpayers to report on the activities of the foreign tax residents which are controlled by them, and pay the tax in Poland as if these activities are carried out according to the Polish tax law. The law affects the activities of these foreign taxpayers in different ways, depending on whether they are incorporated in the EU, or countries with which Poland (or the EU) has concluded a treaty on the exchange of fiscal information, or countries involved in unfair tax competition (the list of such countries is published by the Ministry of Finance). Moreover, the factors which may also be important for the scope of the Polish tax obligations relating to CFC activities are the presence of their commercial substance and the height of the income tax rates applicable in the country of their tax residence.
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