The Polish Sejm has enacted a law to amend the Corporate Income Tax Act, the Goods and Services Tax Act, the Exchange of Tax Information (Other Countries) Act and certain other acts. The law was signed by the President and published on 25 June 2020.
The changes it brings to the Corporate Income Tax Act are intended to implement ATAD II as a measure to prevent hybrid mismatches.
A hybrid mismatch may involve:
(i) differences in the characterisation of entities, i.e. a situation where the same entity is treated as fiscally transparent in one jurisdiction and as fiscally non-transparent in another, or
or
(ii) differences in the characterisation of payments, i.e. a situation where two jurisdictions apply different tax treatments to the same financial instrument (payment).
Among other things, the new law:
- prohibits expenses subject to double deduction from being treated as deductible for Polish tax purposes;
- prohibits expenses subject to deduction without inclusion from being treated as deductible for Polish tax purposes;
- imposes tax rules for dual resident entities,
- imposes tax rules for disregarded permanent establishments.
Under the transitional provisions, the new law will apply to income derived in any tax year starting after 31 December 2020
ATAD II is implemented for the main purpose of preventing the use of certain international optimisation schemes.
However, note that, for all practical purposes, the law will also require a review of MNE structures to check for hybrid entities or instruments.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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