No more tax neutral exchange of shares if it is aimed at avoiding taxation – this is the most important proposal of the Ministry of Finance contained in the draft amendment of the Personal Income Tax and Corporate Income Tax Acts.

The Ministry also wants to clarify the definition of revenue generated in Poland. The amendment is supposed to apply from 2017. Apart from the proposal to reduce the CIT rate from 19 per cent to 15 per cent for small taxpayers, the amendment introduces many changes intended to close loopholes in the tax system.

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Income from the sale of shares in domestic real estate companies (where at least 50 per cent of assets constitutes real estate) is supposed to be among the sources of income which will be subject to taxation in the case of non-residents. Marta Ignasiak, tax advisor at FKA Furtek Komosa Aleksandrowicz, points out that the tax obligation of non-residents may refer not only to direct sale of shares (which Polish tax authorities are able to trace), but also to indirect sale when the sale is carried out by, for example, a grandmother company.

However, the expert draws attention to the fact that treaties on the avoidance of double taxation must be taken into account. “Foreign sellers may be subject to taxation only if the treaty concluded with the taxpayer’s country of residence so permits,” she explains.

Such taxing right is, for example, included in the treaties concluded with Luxembourg, France, Malta and Germany.

“If a Cypriot company sells shares it will not be taxed as the treaty concluded with Cyprus does not permit that. This may encourage entrepreneurs to look in that direction again,” Marta Ignasiak comments.