AS OF 1 JANUARY 2018, TAXMAN MAY CHECK YOUR ARM'S LENGTH CREDITWORTHINESS

This is to let you know of a new regulation in the CIT Act. As of 1 January 2018, Article 15ca CIT Act authorises tax authorities to verify taxpayers' arm's length creditworthiness.

The new law says that if the borrowing costs as defined in Article 15c(12) exceed the amount of funding the taxpayer could otherwise obtain from unrelated parties (arm's length creditworthiness), the tax authorities may assess his income to be higher (or loss to be lower) than actually declared by him.

Due to the unclear wording of this law, especially as regards what it is that the tax authorities should assess, revision work is already in progress.

The projected change in the law is intended to give it the right meaning, i.e. that it empowers tax authorities to ensure that taxpayers cannot deduct interest payments on borrowings which exceed their arm's length creditworthiness.

As revisions to this law are yet to be made, we will keep you informed about the progress of the legislation.

If this issue pertains to your business and you are interested in our assistance, please contact your WTS&SAJA consultant or our office.

 

Doradztwo Podatkowe WTS&SAJA Sp. z o.o. 
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This Newsletter provides general information and is designed to keep you up-to-date with changes in tax law, tax rulings and interpretations, case law development and interesting commentaries.
Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions that follow from the contents hereof.

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