Tax Highlights for Real Estate – January 2023
January 2023
Important tax deadlines for property tax returns
According to the Law on Local Taxes and Fees, legal entities (including limited liability companies, joint-stock companies) are required to submit, to the tax authority having jurisdiction over the location of the property, a property tax declaration (DN-1) for a given tax year, as well as to pay the tax calculated in the declaration to the account of the appropriate municipality. The amount of real estate tax rates shall be determined by the Municipal Council by resolution. The deadline for submission of the declaration and the deadline for payment of the first monthly installment of real estate tax (for January 2023) is January 31, 2023.
Important tax deadlines for withholding tax (WHT)
According to the CIT Law, a company that is a Polish tax payer is required to withhold 20% CIT tax on payments made to Polish tax non-residents for, among other things, interest, copyrights or intangible services as defined in Article 21 of the CIT Law. In light of the above regulations, if during 2022 Polish Companys made payments to Polish tax non-residents that are subject to withholding tax, they are required to prepare and submit to the tax office, by January 31, 2023, an annual CIT-10z return on the amount of income tax withheld for 2022. In addition, making the aforementioned payments in 2022, also results in the obligation to prepare Form IFT-1R (for non-residents who are individuals, including partners of partnerships) and/or Form IFT-2R (for non-residents who are legal entities) for each non-resident to whom payments subject to WHT or WHT exemption were made by Polish SPVs in 2022. Form IFT-1R must be submitted to the relevant tax office by February 28, 2023, and IFT-2R by March 31, 2023.
Ability to use a look-through approach when paying dividends
In an interpretation issued on June 14, 2022, the Director of KIS (Polish Tax Information) confirmed the applicability of the look-through approach to the tax exemption for dividends provided for in Article 22(4) of the CIT Act. In the facts presented, the applicant, which is a Polish company, planned to pay dividends to its sole shareholder – a holding company based in France, which has no operations and no employees. The shareholder of this company is another company based in France, also a holding company, but with extensive infrastructure and human resources, providing support services to other group entities. The company doubted whether, in view of such a shareholding structure, it should investigate the status of the beneficial owner of the dividend payment. At the same time, the applicant wanted confirmation whether, in the event that a shareholder is not considered the beneficial owner of a dividend payment, it is possible to apply the exemption referred to in Article 22(4) of the CIT Law, following the look-through approach.
First of all, the Director of KIS stressed that in the case of application of the tax exemption under Article 22(4) of the CIT Law, the payer is obliged to carry out full verification (carried out with due diligence) of the fulfillment of the conditions that allow the use of the exemption. Thus, in the opinion of the tax authority, the payer is obliged to verify the status of the actual owner of the receivable in relation to the dividend paid. Subsequently, the tax authority agreed with the applicant, confirming the applicability of the look-though approach. Thus, the application of the exemption provided for in the law will be possible with respect to an indirect shareholder of a Polish company (the payer), which is not the direct recipient of the dues paid out, as long as it meets the conditions for applying the exemption under the CIT Act.
Slim VAT 3
The changes covered by the so-called SLIM VAT 3 package have not been referred to the Sejm. The original bill stipulated that the new regulations (with some exceptions) would come into effect on January 1, 2023. Legislative work was prolonged, and in early November 2022. The Ministry of Finance published a new draft incorporating, among other things, changes resulting from public consultations. According to the draft law, the transformed regulations are to include, among other things, an increase in the sales limit of a small VAT taxpayer from EUR 1.2 million to EUR 2 million, the method of determining the conversion rate in the case of an adjustment of an invoice issued in foreign currency, the determination of VAT sanctions (as a result of adjusting Polish regulations to the CJEU judgment of April 15, 2021. in case C-935/19 Vegetable Group,) extending the binding force of WIS to their addressees (currently WIS are binding only on tax authorities) and the right to deduct VAT for VAT on VAT without the need to receive an invoice, and extending the catalog of payments from the VAT account.
The draft, published in November 2022, assumes that most of the changes will not take effect until
April 1, 2023. However, the possibility of settling the so-called “sugar fee” from the VAT account is to take effect later – from July 1, 2023. In turn, the new regulations on VAT sanctions will not take effect until the day after the amendment is announced.
It should be noted, however, that the SLIM VAT 3 package is a draft law that is still being worked on. The final form of the law may change from the current version.