Planned tax remedies in the context of the coronavirus epidemic

The state of epidemic emergency announced in Poland has created an unprecedented situation that is seriously affecting businesses and their economic activity. In recognition of the problems that businesses will have to face in the coming months, the government has announced the rollout of a remedial package called “The Economic and Social Anti-Crisis Shield for the Security of Businesses and Employees in the Face of the Sars CoV-2 Virus Pandemic”, which intends to support businesses and employees in the difficult situation in which they find themselves.

On 19 March 2020, the Ministry of Finance posted on its website The MF’s solutions within the anti-crisis shield package. In the release, in recognition of the problems faced by businesses, the Ministry of Finance presented basic facilitation and relief measures with regard to the settlement of tax liabilities. These solutions are aimed at decreasing the tax liabilities of taxpayers during the time of the crisis caused by the coronavirus (also referred to as “COVID‑19”) by deferring the obligation to pay taxes or even enabling businesses to make additional tax deductions.

These assumptions were reflected in the draft act on amending the Act on special solutions related to preventing, counteracting and fighting COVID-19, other infectious diseases and the resulting crisis situations, and on amending certain other acts dated 21 March 2020 (the “Project”), which is to translate the assumptions into actual legislation. It is envisaged that the new regulations will enter into force on the date immediately following the publication of the act in the Journal of Laws.

Below we present a summary of the most important changes written into the Project in line with the general description of proposed measures presented in an earlier announcement of the Ministry of Finance. We need to emphasise that the contents of the amendments proposed in the Project give rise to certain  concerns as to how these provisions should be interpreted, as well as with regard to their subsequent implementation. We assume that the exact wording of these provisions will be revised and supplemented in the course of the parliamentary legislation process.

TAX AND CUSTOMS AUDITS; TAX PROCEEDINGS  

The Project lays down a plan to introduce provisions allowing a tax authority to suspend, ex officio or at the request of a taxpayer, any pending tax and fiscal audits and tax proceedings. The Minister of Finance will also be authorised to do so as well as specify the territorial application of the suspension, the types of proceedings and audits affected by the suspension, and the period during which the suspension will remain in force, taking into account the length of the declared state of epidemic emergency and the resulting consequences.

LOSS CARRY-FORWARD AND CARRY-BACK

The Project provides that taxpayers that incur a tax loss in 2020 and whose revenues generated in 2020 are at least 50% lower than those earned in 2019 will be entitled to deduct the loss incurred in 2020 from their 2019 income up to the amount of PLN 5 million. The taxpayers will be able to carry forward any undeducted losses to the following tax years.

REDUCTION OF THE TAXABLE BASE SUBJECT TO BANKING TAX

Under the Project, the taxable amount on which the tax on certain financial institutions is levied will no longer have to include the value of assets arising from credit facility agreements extended to businesses affected by the coronavirus and concluded between the date of the enactment of the Project and 31 August 2020.

DEDUCTIBLE DONATIONS FOR THE FIGHT AGAINST COVID-19

The Project states that taxpayers who make donations, whether monetary or in-kind, towards causes related to preventing and fighting coronavirus infections or for the benefit of healthcare facilities, including medical transport entities, as well as donations to the Material Reserves Agency and the Central Base of Sanitary and Anti-Epidemic Reserves will be able to deduct the value of such donations from their income.

DEFERRAL OF THE DEADLINE FOR THE PAYMENT OF THE MINIMUM TAX ON COMMERCIAL PROPERTIES

The Project defers the deadline for the payment of the tax on revenue from buildings (what is referred to as the minimum tax on commercial properties) for the months of March, April and May 2020 until 20 July 2020. The deferral will be available to those taxpayers whose businesses were adversely affected in a given month due to COVID-19 and who generated revenues at least 50% lower than in the corresponding month of 2019.

ABANDONMENT OF THE SIMPLIFIED ADVANCE TAX PAYMENTS SCHEME

Small taxpayers who in 2020 opted to make simplified advance tax payments towards their annual income tax obligations will be able to revert to making such payments for the months of March to December 2020 based on their current income provided that their businesses have been adversely affected by COVID-19.

EXEMPTION FROM MANDATORY BAD DEBT RELIEF IN INCOME TAXES

On 1 January 2020, provisions on what is referred to as bad debt relief in income taxes entered into force based on which any overdue liabilities increase a debtor’s taxable amounts. The Project provides that taxpayers whose businesses were adversely affected in a given month due to the COVID‑19 epidemic and who generated revenues at least 50% lower than in the corresponding month of 2019 will not be required to increase their advance tax payments in relation to unpaid liabilities.

POSTPONEMENT OF THE DEADLINE FOR THE REMITTANCE OF ADVANCE TAX PAYMENTS ON SALARIES

The Project postpones the deadline by which employers are required to remit advance income tax payments withheld in March and April 2020 with regard to, inter alia, the salaries of employees and remuneration paid to other retained workers until 1 June 2020 if the relevant tax remitters were adversely affected by the COVID‑19 epidemic.

DEADLINE FOR THE ISSUANCE OF INDIVIDUAL TAX RULINGS

The Project extends the deadline for the issuance of individual tax rulings. The three-month deadline will be extended by an additional three months for:

(i) applications submitted but not examined by the date on which the new provisions enter into force; and

(ii) applications submitted between the date the new provisions enter into force and the date until the state of epidemic emergency ends. In addition, the Minister of Finance may further extend that deadline by a maximum of up to three more months in recognition of the consequences of the COVID-19 epidemic.

OTHER CHANGES

The Project also contains other proposals seeking to mitigate the tax burden of taxpayers affected by the epidemic by introducing reliefs such as:

(i) the deferral of the requirement to submit the JPK_VAT standard audit file in the new format until 1 July 2020;

(ii) the waiver of the prolongation fee for deferring a tax payment deadline or breaking a tax payment up into instalments; and

(iii) the exemption of loan agreements concluded by affected businesses from the tax on civil law transactions.

REMEDIES RELATED TO THE PAYMENT OF TAX LIABILITIES

In addition to the remedies available under the new provisions set forth in the Project, taxpayers who face problems with the timely payment of their tax liabilities may apply for relief. The existing provisions of the Tax Ordinance (Article 67a et seq.) allow taxpayers to request:

(i) that their tax payment deadline be deferred or that the due tax be broken up into instalments;

(ii) that their overdue tax liabilities be deferred or broken down into instalments; or

(iii) that their overdue tax liabilities be cancelled in whole or in part.

THE RYMARZ ZDORT TAX TEAM

The Rymarz Zdort tax team is one of the largest teams of its type operating within a single law firm and it provides a broad range of comprehensive tax advisory services. The team comprises tax advisors, advocates and tax experts who have extensive experience gained in the largest Polish law firms and Big Four firms. We cooperate closely with lawyers from other practices to deliver complex solutions that comprise not only top-of-the-range tax advice but also general insights into a client’s legal position. Our advisory services cover a broad spectrum of tax matters, including CIT, PIT, VAT, real estate tax, tax on civil law transactions and international taxes.

If you are interested in more detailed information on the changes to the tax law that are planned to be enacted due to the coronavirus epidemic emergency, please do not hesitate to contact us.