Concept changes in CIT and PIT

A draft of further tax changes has been published on the website of the Central Government Legislation Centre. This time they will mainly hit the taxpayers of money transport and foreign settlements. The government wants the changes to take effect in January 2023. You can read the content of the concept here. †

Also read: The minimum CIT is suspended for the time being >>

Proposed changes

The draft contains a long list of changes that the Ministry of Finance intends to implement. Only with regard to corporate income tax (hereinafter: VPB) the amendments contain twelve points and include:

  1. amendment and suspension of the application of the minimum income tax provisions;
  2. changing the date of updating the data of the individual taxpayer;
  3. change of regulations on foreign controlled entities (CFCs);
  4. changing the rules for taxation with tax on deferred income;
  5. changes in the withholding tax (WHT) regulations;
  6. changes in the settlement of debt financing costs in tax costs;
  7. amendment of the provisions on the Polish holding company (PSH) (easing of the conditions to benefit from the exemption);
  8. amendment of the provisions on flat-rate taxation of business income;
  9. amendment of the provision on the deadline for paying contributions for work and equivalent income, partly financed by the payer, contributions to the Labor Fund, the Solidarity Fund and the Employee Benefit Guarantee Fund;
  10. simplification of the procedure for the refund of tax on property income
  11. changing the provisions on the documentation obligation in the context of the so-called Paradise transactions;
  12. amendment of the provisions relating to the obligation of the Minister of Finance to provide declaration templates.

However, under the Personal Income Tax Act (PIT), the draft provides for:

  1. amendment of the provisions on foreign controlled entities (CFC) (analogous to the CIT Act);
  2. amendment of the withholding tax regulations (WHT) (analogous to the WvB Act);
  3. amendment of the provision on the procedure for the refund of tax on income from buildings (analogous to the Money Transport Act);
  4. changing the provisions on the documentation obligation in the context of the so-called Paradise transactions (analogous to the Money Transport Act);
  5. an amendment to the provisions relating to the obligation of the Minister of Finance to provide declaration forms (analogous to the VvB Act and the Forfait Act).

The Tax Ordinance is also being amended. – The core of the problem is the clarification of the obligation to provide the head of the tax authorities with information about agreements with non-residents in the case of the obligation to provide information about transfer prices (Art.82 paragraph 1c of the Tax Authorities Ordinance) – explain the authors of the design.

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In turn, as PAP reported, Artur Soboń, the deputy finance minister, said that: the ministry wants to suspend the minimum CIT for a year and propose a new solution from 2023. – There will be a different tax base, more understandable for entrepreneurs, and a different way of calculating the profitability ratio, taking into account the specificity of different costs. For example, it involves taking into account rising energy costs, wages and salaries when calculating profitability, taking into account the specificity of factoring, leasing or entities purchasing excise goods, which affects the level of margins achieved – he explained when asked about the planned solution.

Sobo has announced that The Ministry of Finance proposes, among other things, to abolish the provisions on hidden dividends. – This is a very favorable change for entrepreneurs. On transfer pricing, we want to simplify the rules for the documentation of paradise transactions and raise the applicable documentation thresholds, he announced. Asked if there will also be changes to the Estonian CIT, he said that the main principles of this solution will not be changed, while detailed regulations that raise doubts or practical problems will be improved.

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