Fakty Komentarze Analiza (Facts Comments Analysis) l The Polish tax on controlled foreign companies

What’s new in law, and what should we be aware of?

Facts

The work on amendments to the regulations aimed at combating tax evasion in the form of transferring revenue to controlled foreign companies (CFC) in tax havens is about to be completed.

If the amendment regulations come into effect, residents of Poland will be subject to taxation in the country where the income of controlled companies is earned, if the latter are tax residents of countries and territories which apply harmful tax competition or countries which have not concluded a tax information exchange agreement with Poland. This applies to situations where the said companies do not perform “genuine business activity” in these countries and the rate of income tax in the said territories is at least 25% lower that the corporate income tax rate in Poland (i.e. below 14.45%)      

Comments

According to the planned amendments, some payers of corporate income tax may be burdened with tax or information obligations regarding the possibility of transferring their taxable income to controlled foreign companies.

Analysis

It is questionable whether the tax measures introduced by this amendment (i.e. an entity being taxed for the income of another entity) will be in accordance with the demanding provisions of the Constitution of the Republic of Poland.

In this respect, it is worth mentioning a similar case of an equally imprecise regulation aimed at avoiding tax evasion, which also raised many doubts, e.g. the circumvention clause was negatively assessed by the Constitutional Tribunal.  

The full version of the bulletin can be found here.

If you need tailored advice please contact:

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