This document summarizes changes to Poland's corporate income tax (CIT) and transfer pricing regulations in 2019. Key changes include: 1. Reduction of transfer pricing documentation duties for small and medium enterprises. New materiality thresholds were introduced for transfer pricing documentation. 2. Simplification of tax duties around transfer pricing documentation including extended deadlines, ability to submit documents in English, and new exemptions. 3. Revisions to Poland's approach to the arm's length principle including the ability of tax authorities to recharacterize or disregard related party transactions. 4. Introduction of an "IP box" tax regime with a 5% tax rate on qualified income from intellectual property rights like patents held in Poland

1. PwC
Polish CIT in 2019
CIT and TP revolution marches on
10 October 2018

2. PwC
PwC 2
Agenda
2
overhaul of the transfer pricing regime, in particular:
• tax controls in Poland
• duties resulting from latest transfer pricing regulations
• impact of art. 15e of the Polish CIT Law
IP BOX
mandatory disclosure rules (MDR)
completely new mechanism of withholding tax obligations
introduction of an exit tax on transfer of assets abroad or change of tax residency
deduction on equity increase
deductibility limitations for car fleet costs
regulations concerning virtual currencies
2.
1.
3.
4.
5.
6.
7.
8.

3. PwC 3
Changes in TP regulations – main goals:
• Reduction of TP documentation duties, mostly for
micro, small and medium-sized enterprises
• Lack of documentation duty for local transactions
• New TP documentation materiality thresholds
• Introduction of safe harbours
Simplification of
tax duties
• Unification of TP concepts and definitions
• Significant adjustments to the arm’s length
principle including non-recognition and
recharacterization
Sealing the tax
system

4. PwC
Tax
havens /
joint
ventures
4
Reduction of documentation duties
CbCR
> 750 M
EUR
(Group)
5
Local File1
> 2 M EUR
CIT-TP
> 10 M EUR
3
Transfer
pricing
documentation
2 Statement
4
Master File
> 47 M EUR
> 20/50 k EUR
• 10 M PLN (= approx. 2.5 M EUR) per transaction for
tangible and financial assets;
• 2 M PLN (= approx. 0.5 M EUR) for other
transactions.
New materiality tresholds for transactions:
Reduction of documentation burden for
micro, small and medium-sized enterprises

5. PwC 5
Extension of deadlines
• Deadline for filing a statement on the preparation of local transfer
pricing documentation: 9 months after the end of the tax year for local
documentation.
• Deadline for preparing the master file: 12 months after the end of the
tax year.
Facilitations and releases
• Master file can be filed in English.
• Four new exemptions (transactions which will not need to be
documented).
Unification of concepts and
definitions
Inclusion of separate TP chapter in CIT law required new definitions
including transfer price, associated companies, controled transaction.
Introduction of safe
harbours
• Safe harbours will be introduced for two transaction types, i.e. loans
meeting specific requirements and low-value-adding services.
• An official interest rate will be published or mark-up of 5% will be
recommended.
Simplification of transfer pricing duties

6. PwC 6
Sealing the tax system
Transfer
pricing
adjustments
Modified rules on conducting transfer
pricing adjustments: they will determine
in which period the adjustment should be
reported.
Adjustment
to arm’s
length
standard
Tax authorities will be
able to re-characterize
or even disregard related
party transactions if they
conclude that unrelated
entities would not enter
into transaction
declared by the taxpayer
or would conclude
different transaction.
Introduction
of techniques
of valuation
Introduction of solutions such as
valuation techniques for determining
revenues or costs incurred by
taxpayer in controlled transactions.

7. PwC 7
Adjustment to arm’s length principle
Adjusted approach to arm’s
length principle:
-delineation of actual transaction,
-recharacterisation or non-
recognition,
-adjustments to burden of prove
while setting transfer price,
New
reporting
possibilities
Broadening
the scope of
associated
companies

8. PwC
IP BOX – basic information
Tax rate – 5% on qualified income
Possibility to apply the tax relief as long as the protection of intellectual
property right lasts (e.g. for patents max. 20 years)
Innovation box to include:
• right to an invention patent, including supplementary protection certificate,
• protection rights to utility model,
• right of industrial design registration,
• integrated circuits topography,
• right to registration a medicinal/veterinarian product,
• copyright for computer programs.
8

9. PwC
IP BOX – basic information
R&D works Benefits from IP
Box
5 % beneficial
tax rate
One of the key issue is the so-called
requirement of significant activity, which
states that the possibility of using the
Innovation box will depend on the scope of R&D
activities carried out by taxpayers.
The companies will have to prove that they have
completed a significant part of R&D works
on their own or have acquired services related to
R&D works from unrelated entities.
The aim is to tax the income from intellectual
property in the place where it was
developed.
The OECD guidelines under
the BEPS project
(Base Erosion and Profit Shifting)
are the determinants of the
Innovation Box
9

10. PwC
IP BOX – basic information
The qualified income is determined as particular income multiplied by the index as calculated below:
(𝒂 + 𝒃) × 𝟏, 𝟑
𝒂 + 𝒃 + 𝒄 + 𝒅
a – costs of R&D works performed by the taxpayer
b – costs of acquisition R&D works for qualified IP
(other than the costs qualified as d, obtained from
unrelated entity)
c – costs of acquisition R&D works for qualified IP
(other than the costs qualified as d, obtained from
related entity)
d – IP acquired by taxpayer
10

11. PwC
Mandatory disclosure rules
• One of main changes in anti-avoidance measures is introduction of mandatory disclosure rules (MDR) i.e. the obligation to
notify information on tax schemes to the tax authorities.
• The above change results from implementation of the Council Directive (EU) 2018/822 of 25 May 2018 (so called DAC6 Directive).
• Provisions of the Directive apply to transactions and structures that refer to more than one jurisdiction - have multinational
character (EU or non-EU).
• Polish regulation extend their scope by implementation of similar regulation covering also domestic transactions.
The Polish MDR regulations imposes mandatory disclosure for the following arrangements:
 Cross-border arrangements where the arrangements fall within certain „hallmarks” mentioned in the DAC6 and implemented
into the Polish regulations and where the tax benefit is a major or one of major advantage (main benefit test) resulting from
arrangements.
 Domestic arrangements for which the main benefit test and criteria of being qualified beneficiary apply. The qualified
beneficiary should be seen as met when:
 The revenues or costs or value of asset within the meaning of Polish Accounting Act exceed in the previous or current year
PLN 30 million or
 when the organised or implemented arrangement concerns goods or rights with fair market value exceeding PLN 30
million.
11

12. PwC
Mandatory disclosure rules
Basic facts and steps in the process:
1. Reporting obligation lies on an intermediary, i.e - a person
(entity), especially tax advisor, attorney, legal counsel, bank employee that
designs, markets, organizes or makes available for implementation or
manages the implementation of a reportable cross-border arrangement.
2a. Intermediary will have 30 days to provide the head of KAS
(National Tax Administration) with information about a tax scheme,
counting from making it available to the customer or starting
implementation or preparing for implementation.
2b. If the intermediary due to his professional secrecy is exempt from the
obligation to disclose the reportable arrangement then the taxpayer
should disclose the arrangement. The intermediary should inform
taxpayer in writing on his exemption and provide information to the head
of KAS that taxpayer was informed that the intermediary will not disclose
reportable cross-border arrangement.
3. The Polish tax authority will exchange gathered information
automatically on a quarterly basis with the tax authorities from other EU
member states via the Common Communication Network (CCN).
Internal MDR procedure will be required to be implemented by
intermediaries which have revenues / costs exceeding PLN 8 million.
Intermediary Taxpayer
Polish Tax
authority
(KAS)
Tax
authorities
DE, FR,…
Services
1
2a
Reportable
information
2b
3
Reportable
information
Information on
taxpayer and
arrangment –
automatic
exchange
12

13. PwC
Withholding tax in Poland – a new mechanism
A completely new mechanism of settlement of WHT in relation to payments exceeding PLN 2 million per annum for each
taxpayer is to be introduced. Under the new rules, the conditional exemption from WHT or application of the reduced
tax rate stipulated in the applicable Double Tax Treaty will be restricted.
Payments not
exceeding PLN 2
million per annum –
additional
documentation
• Tax remitter is entitled to apply reduced WHT rate or WHT exemption in
accordance with previous WHT provisions.
• Additional documentation might be needed to be gathered by a tax
remitter, e.g. a written statement from the recipient of payments
confirming that the conditions required to apply a WHT exemption or
benefit from preferential conditions based on the provisions of DTT are
met.
Payments exceeding
PLN 2 million per
annum – certification
proces
• The Directive based exemptions (implemted to the CIT Law) or
application of the reduced WHT rate based on an applicable DTT must be
disregarded for the purpose of application of standard domestic rates
(19% for dividends and 20% for interest, royalty and service payments),
subject to two preferential options (certification process and opinion).
13

14. PwC
Withholding tax in Poland – a new mechanism
Certification process
• New mechanism will allow tax remitters not to withhold tax in relation to payments exceeding PLN 2 million per annum, if the remitter
submits a statement confirming that:
1. it possesses all documents required by tax regulations necessary for applying reduced WHT rate or exemption from WHT;
2. it is not aware of any circumstances which speak against granting tax exemption and such verification was done with due diligence.
• The statement should be signed by the head of the tax remitter entity under penalty liability.
Formal opinion (for Directive based exemptions only)
• Taxpayer or tax remitter which incurred the economic cost of WHT should be able to apply to the tax authorities for an opinion confirming
that tax may not be withheld based on the Parent-Subsidiary Directive or Interest/Royalties Directive implemented to the CIT Law.
• The opinion shall be issued within 6 months from date of application and be valid for 36 months. Application for the opinion shall be
subject to fee of PLN 2,000.
• Tax application for the opinion might be rejected if:
o the taxpayer does not meet the requirements stipulated in the CIT Law;
o anti-avoidance provisions may be applicable;
o documents attached to the application are not in accordance with the factual circumstances;
o the taxpayer does not conduct a business activity in the country of his tax residence.
14

15. PwC
Withholding tax in Poland – a new mechanism
WHT refund
• Taxpayer / remitter shall have the right to claim for a WHT refund. WHT refund procedure will be similar to current WHT claims,
requiring:
1. extensive analysis of source documents;
2. collection of additional documentation, including: a) certificate of tax residence; b) bank transfers confirming payments subject to WHT;
c) relevant agreements; d) taxpayer’s statement on fulfilment of the conditions for exemption; e) statement of the beneficial ownership
status; and f) statement confirming real economic activity of the taxpayer in the country of its residence to which revenues sourced in
Poland are linked to.
• Refund application will need to be submitted by means of electronic communication.
• Refund procedure should be completed within 6 months.
• In case there are doubts regarding fulfilment of conditions for a refund, a tax control of a taxpayer may be initiated.
15

16. PwC
PwC 16
Do you have annual interest/royalty
/dividend payments to a single
recipient exceeding PLN 2m
(c.a. EUR 475k)?
16
A. Yes
B. No

17. PwC
Exit tax
The exit tax, officially referred to as the tax on unrealized
gains, will apply to companies that choose to change their tax
residence or transfer assets (including enterprise or
organized part of an enterprise) to another country as a result of
which Poland will loose in whole or in part right to tax
income from the disposal of those assets.
The provisions regarding exit taxation are also applicable to free
of charge transfer of the ownership over the assets to
another company being Polish tax resident or contribution of
assets when Poland looses rights to tax such transaction.
Generally, transactions which result in temporary (up to 12
months) transfer of assets are exempt from exit taxation.
Transfer by a Polish tax
resident of asset/s from
the its head office to the
permanent establishment
(PE) in another
country
Transfer by a
Polish non-resident
of business (od part
of business) carried
on by its Polish PE
to a foreign
jurisdiction
Transfer by a
Polish non-resident
of asset/s from the
taxpayer’s Polish PE
to its head office or
another PE in a
foreign jurisdiction
17

18. PwC
Exit tax
Tax rate
• Exit tax rate: 19% of the tax
base.
• Taxpayer may apply to spread
payment of exit tax over 5
years, as long it is not aimed at
tax avoidance.
Tax base
• The tax base will be the sum of
company’s hypothetical gain
calculated as the difference
between the market value of
particular transferred asset
and its tax value (non-
amortized costs of the
acquisition).
• In case of transfer of organized
part of enterprise / enterprise
the income from unrealized gains
concerns the whole enterprise
(or its organized part).
Payment of tax
• There is a possibility to credit
foreign exit tax paid by the
taxpayer in other country.
• Taxpayers are obliged to file tax
return concerning amount of exit
tax until the 7th day of the
month following the month in
which the unrealized gains was
generated.
18

19. PwC
6. Notional interest deduction
Entities shall be allowed to recognize certain amounts
(calculated as interest based on the market level)
tax deductible costs related to:
• retained profits, and
• contribution to equity.
Contribution to
equity
Retained
profits
Multiply by NBP
reference rate*
plus 1%
Cost base
Additional deduction
cannot exceed
PLN 250k per year
Deduction applicable if
equity not returned within
3 years
19
*currently 1,5%

20. PwC
7. Deductibility limitations for car fleet costs
20
Maximum leased car
value:
PLN 150k
Business and private
use:
75% limitation
Insurance
and other costs:
150k
car value
Previous rules applies
to agreements
concluded until
31 December 2018.
however, if the
agreement will be
changed or renewed,
new rules applies.
Publishing of the
Act
Agreements
concluded after
publishing the Act:
new rules applies
New rules appliesLimitations are
entering into force
the date following
publishing the Act

21. PwC
PwC 21
Please indicate which of the below
issues could affect you most:
21
A. TP compliance changes
B. IP box
C. new mechanism of withholding tax obligations
D. deductibility limitations for car fleet costs

22. PwC
Standard tax rate
(19%) applies
Virtual currencies
Income derived
from an exchange
of e-currencies for
other currencies/
goods/ services/
intangible assets
pertains to
“capital basket”
Exchange
between
e-currencies is tax
neutral;
Losses from sale
of e-currencies
cannot be
deducted;
Only expenses
directly connected
to purchase of
e-currencies shall
be tax deductible
costs
Expenses related
to exchange
between
e-currencies are
non-tax
deductible
Virtual currencies – important changes
22

23. PwC 23
Contact details:
Marcin Jaworski
Senior Manager
Tel. +48 502 18 48 38
marcin.jaworski@pwc.com
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Partner
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Senior Manager
Tel. +48 519 50 46 05
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