On May 12, 2022, the Minister of Health issued a regulation calling off the state of epidemic in Poland, effective as of May 16, 2022. As a result, the exemption from tax on income from buildings ceases to apply as of May 31, 2022 (pursuant to article 38ha of the CIT Act). What this means for CIT taxpayers is the return – starting from June 01, 2022 – of the obligation to calculate the tax on income from buildings for each month and to pay it until the twentieth day of the month following the one for which it is due (the deadline for payment covering June 2022 is July 20, 2022).

In light of the legal status that will come into effect as of January 01, 2023, the costs of leasing a real property from a shareholder will constitute the so-called “disguised dividend,” according to the advance tax ruling issued on April 29, 2022 by the President of the National Fiscal Information (0111-KDIB1-1.4010.94.2022.2.JD).

The case (future event) concerns a company that leases retail and office space from one of its shareholders. The properties were purchased by the shareholder from unrelated parties, and the cost of the lease will not be dependent upon the Company’s profit (or lack thereof) and its value. The President of the National Fiscal Information decided that the new definition of a “disguised dividend” would apply here because the property had been acquired before the Company was established, unless the total sum of the costs incurred by the Company in a financial year, which constitute the disguised dividend, is lower than the gross profit (as defined in accounting regulations) generated in the financial year in which these costs are included in the Company’s financial result.

As a result, the lease-related costs will not be regarded as tax-deductible expenses under the new regulations.

Financial settlements between the parties to a joint venture are not subject to VAT, according to the advance tax ruling issued on May 04, 2022 by the President of the National Fiscal Information (0111-KDIB3- 1.4012.84.2022.1.IK).

The case concerns a transfer of funds resulting from the distribution of profits / coverage of losses between the parties to a joint venture. The parties assume that these activities are technical in nature and do not involve the provision of services or supply of goods. The actions performed as part of the joint venture are primarily aimed at achieving a common goal rather than providing services. The tax authority concluded that in this situation, financial settlements between the parties cannot be treated as the performance of services or supply of goods, and, consequently, they do not constitute activities that are subject to VAT.

“It can be concluded that payments due to the stakeholders are dependent upon the profits generated from the joint venture. Consequently, cash flows resulting from such agreement will not be regarded as payments for the fulfillment of an obligation. This means that such distribution constitutes a technical and accounting action only. There will be no transfer of actual economic control over the goods and no actual performance of services between the parties. It is impossible to identify any financial benefits that would be obtained by each of the parties in relation to the aforesaid settlements. As a result, JV-related settlements between the parties are not subject to VAT,” – concluded the President of the National Fiscal Information.

A lessor that receives a refund of the property tax and perpetual usufruct fee from the lessee should include them together with the rent in a VAT invoice and apply the VAT rate for the lease (the so-called “comprehensive service”), according to the advance tax ruling issued on May 04, 2022 by the President of the National Fiscal Information (0113-KDIPT1 1.4012.184.2022.2.MSU).

The case concerns a taxpayer that leases a warehouse/workshop with office and staff premises. In addition to the rent, the lessee also pays an amount corresponding to the value of the real estate tax and the perpetual usufruct fee. The President of the National Fiscal Information has noted that the perpetual usufruct fee and the real estate tax are directly connected with the lease services, meaning that they are VAT-taxable in the same way as the lease rent.

“Regardless of whether the amount of the real estate tax and the perpetual usufruct fee, returned to the lessor by the lessee, has been included in the rent and constitutes its component, or whether it is separated from the rent, it is always charged to the lessor (…) Consequently, the amounts of the perpetual usufruct fee and the real estate tax constitute the price-generating element of the property lease and are directly connected therewith, meaning that they are subject to VAT in accordance with the rules applicable to the lease services,” – noted the President of the National Fiscal Information.

A VAT invoice cannot be amended/revised in relation to the planned waiver of debt, according to the advance tax ruling issued on May 06, 2022 by the President of the National Fiscal Information (0111-KDIB3-1.4012.234.2022.2.KO).

The case concerns a company which, due to the ongoing armed conflict in Ukraine, is considering the waiver of debt of its Ukrainian partners (at the creditor’s choice and with the debtor’s consent). The President of the National Fiscal Information believes that in this case, the company is not entitled to issue an amended invoice since such waiver cannot be equated with a discount or price reduction.

“The agreement with business partners only concerns the waiver of debt and cannot be regarded as the same as a discount or a price reduction,” – noted the President of the National Fiscal Information.

Receipt of cash due to a partial reduction of a contribution in a limited partnership is categorized as capital gains and is subject to PIT, according to the ruling issued on April 11, 2022 by the Provincial Administrative Court in Gdańsk (case files no. I SA/GD 1700/21).

In the case of a planned return of part of the contribution, resulting from the payment of funds corresponding to the contribution reduction value, PIT-taxable capital gains will emerge for the partner of a limited partnership.

A financial benefit due to the lessor in connection with the relocation, extension, demolition, removal, dismantling or renovation of a building will be subject to VAT, according to the advance tax ruling issued on April 01, 2022 by the President of the National Fiscal Information (0113-KDIPT1 1.4012.80.2022.2.ŻR).

The lessor’s consent for the relocation, reconstruction, demolition, removal, dismantling or renovation of a building/structure in return for a specific fee constitutes a service, as defined in the VAT Act, and is subject to VAT. The tax authority holds that in such case, the payment is, in fact, made for tolerating an act or situation, or for refraining from performing an act. Hence, pursuant to article 106b section 1 of the VAT Act, the lessor is/will be obliged to issue invoices covering this activity.

Need any assistance? Got any questions? Call or e-mail us.

Małgorzata Wąsowska
Certified Tax Advisor / Partner / Head of Tax
+48 691 477 047
malgorzata.wasowska@actlegal-bsww.com

Jakub Świetlicki vel Węgorek
Certified Tax Advisor / Senior Associate
+48 505 703 768
jakub.swietlicki@actlegal-bsww.com

Szymon Kokot
Certified Tax Advisor / Trainee Attorney-at-law / Associate
+48 691 557 507
szymon.kokot@actlegal-bsww.com

Katarzyna Adydan
Certified Tax Advisor / Senior Associate
+48 665 667 110
katarzyna.adydan@actlegal-bsww.com

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It is possible to categorize uncollectible receivables from any type of guarantee issued by a bank (rather than exclusively from loans) as tax-deductible expenses, according to the ruling issued on March 09, 2022 by the Supreme Administrative Court (case files no. II FSK 1553/19).

The Supreme Administrative Court noted that bad debts written off in relation to such guarantees can be recognized as tax-deductible expenses in case the guarantees referred to in article 16 section 1 item 25 c) of the CIT Act are provided not only in connection with a loan, but also for any other purpose. Based on a linguistic interpretation of that provision, the phrase “repayment of loans” refers only to “sureties” and does not apply to “guarantees.”

Repayment of debts secured with a mortgage on a real property directly to the account of the mortgage creditor is regarded as the seller’s income, according to the ruling issued on March 09, 2022 by the Provincial Administrative Court in Gdańsk (case files no. ISA/GD 1062/21).

We cannot rely on the general concept of revenue (i.e. a definite gain) in a case involving disposal for a specific fee because – as specified in article 14 section 1 of the CIT Act, which forms a special provision in relation to article 12 section 1 of the CIT Act and defines the concept of revenue from disposal of items and proprietary rights for a specific fee, the revenue from such disposal corresponds to the value of the item (proprietary right), as expressed by the price specified in the agreement, regardless of the recipient. Consequently, the repayment of mortgage-secured debt to the mortgage creditor is regarded as a gain for the seller of the property.

Loss on the sale of a claim covering a “security deposit” which has not been returned by the contracting party, formerly included in the revenues of the transformed company, may be regarded as tax-deductible expenses of the newly-established private limited liability company, according to the ruling issued on March 08, 2022 by the Supreme Administrative Court (case files no. II FSK 1543/19).

The case concerned the transformation of a sole proprietorship into a private limited liability company. The newly-established company will be entitled to obtain the return of the amount of the security deposit which was retained by the taxpayer’s business partner in order to secure the proper performance of construction works.

The legal predecessor of the private limited liability company recognized the claim as its receivables, meaning that the future event meets the criteria specified in article 16 section 1 item 39 of the CIT Act, according to which tax-deductible expenses do not include “losses on the disposal of claims/receivables for a specific fee, including in the manner specified in article 12 section 1 item 7, except for the claims/receivables or parts thereof which were previously recognized as revenue due – up to the amount formerly recognized as revenue due.” Given the above, a loss resulting from the sale of the aforesaid claims/receivables may be considered as a tax-deductible expense of a sole-shareholder private limited liability company.

Revenue in the form of a free-of-charge benefit emerges upon execution of a suretyship agreement, rather than upon its performance, according to the ruling issued on March 09, 2022 by the Supreme Administrative Court (case files no. II FSK 1615/19).

The company believed that revenues only arise upon performance of a suretyship agreement. However, according to the court, revenues in the form of a free-of-charge benefit emerge earlier, i.e. upon execution of such agreement. Moreover, the court did not share the company’s position that it is not possible to establish the value of the benefit in question, and that there are no regulations which could be used to determine that value. Pursuant to the CIT Act, “the value of in-kind benefits, incl. unpaid ones, is determined on the basis of market prices used for performance of services or provision of items/rights of the same type and category, taking into account their condition, degree of wear, and the time/place.” In the case at hand, the amount and conditions of the loan are clear, which means that there should be no difficulty in establishing the value of remuneration for the surety with respect to a specific borrower and the loan obtained by that borrower.

It is possible to amend the VAT amount incorrectly included in an invoice that allegedly covers non-existent operations if the tax authority has ultimately denied the invoice recipient’s right to deduct VAT, according to the verbal statement of reasons to the ruling issued on March 09, 2022 by the Provincial Administrative Court in Łódź.

The Provincial Administrative Court has decided that if the tax authority denied the recipient of a “fake invoice” the right to deduct input VAT resulting from such invoice, the risk of loss of tax revenues related to the deduction ceased to exist. Consequently, the tax authority cannot refuse the option to amend VAT that was incorrectly specified in the invoice – this goes beyond the prevention of the tax revenue losses because there is no longer any possibility of such losses.

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Need any assistance? Got any questions? Call or e-mail us

Małgorzata Wąsowska
Tax Advisor / Partner / Head of Tax
+48 691 477 047
malgorzata.wasowska@actlegal-bsww.com

Jakub Świetlicki vel Węgorek
Tax Advisor / Senior Associate
+48 505 703 768
jakub.swietlicki@actlegal-bsww.com

Szymon Kokot
Tax Advisor / Trainee Attorney-at-law / Associate
+48 691 557 507
szymon.kokot@actlegal-bsww.com