Fakty Komentarze Analiza (Facts Comments Analysis) l Changes to income tax – thin capitalisation

TAX UPDATES

Facts

Significant changes to regulations on corporate income tax with regard to capital groups are inevitable. As of 1 January 2015, a new thin capitalisation regime will be introduced. The amended regulation will include provisions on controlled foreign entities and it will make the currently-binding provisions regarding transactions between affiliated entities and the manner of recording such transactions more specific. 

Coments

The most significant changes will be introduced in the provisions regarding thin capitalisation under which taxpayers will have the right to choose the manner of establishing the limit of tax-deductible interest amounts. The present method (based on the debt ratio) will be slightly changed but the change will bring some serious consequences. The new method (based on the asset ratio) may be an interesting alternative.

Analysis

It is hard to unequivocally evaluate the amended regulations on thin capitalisation. On the one hand, they introduce specified regulations for certain entities from the financial sector. On the other hand, the possibility to exempt typical intra-group financing from the regulation has been seriously limited. As a result, once the amendment is implemented, it will be more difficult to deduce tax interest costs.

The full version of the bulletin can be found here.

Do not hesitate to contact us to verify how the changes may impact your tax settlements:

Mariusz Aleksandrowicz, attorney-at-law, tax advisor, partner in the tax department
T: + 48 22 581 44 03
E: maleksandrowicz@fka.pl

Marta Ignasiak, lawyer, tax advisor in the tax department
T: + 48 22 581 44 18
E: mignasiak@fka.pl