Recently it has become rather popular to impose various new quasi-taxes on entrepreneurs, where using the word “tax” is to be avoided like the plague. There have already been various so-called fees (e.g., sugar, VOD, and soon to come  “plastic”), and now the Polish Ministry of Finance has added “contributions” to this growing list. Entities which generate revenues from conventional and/or online advertising are in the spotlight this time, which as it can be surmised from the Ministry of Finance’s announcement – during the COVID-19 pandemic are doing so well that they should support the National Health Fund (NFZ) and cultural institutions in these times of crisis.

On 2  February, a bill on additional revenues of the National Health Fund, the National Fund for the Protection of Monuments, and the establishment of a Fund for Culture and National Heritage Support in the Media Area was added to the list of legislative work of the Chancellery of the Prime Minister (KPRM). On the same day, the Ministry of Finance submitted the draft act for pre-consultation.

The bill assumes imposing new contributions on advertising revenues that taxpayers engaged in certain types of business activities would be required to pay. The proposed contributions include:

1) contributions from conventional advertising revenues, and

2) contributions from online advertising revenues.

The bill is proposed to come into force on 1 July 2021.

Contributions from conventional advertising revenue – who does this concern

According to the current draft act, the contributions from conventional advertising revenue are to cover:

  • media service providers,
  • broadcasters,
  • entities which run cinemas,
  • entities placing advertising on an outdoor advertising medium,
  • publishers,

- which derive their revenue in the territory of the Republic of Poland (RP) from rendering services in the scope of:

  1. broadcasting of advertising on television, radio, displaying advertising in cinemas or placing advertising on an outdoor medium in excess of PLN 1 million,
  2. placing advertisements in press in excess of PLN 15 million.

Under the current draft, these thresholds have a "safe harbour" character. As an exception, in 2021 the abovementioned thresholds would be respectively PLN 500,000 and PLN 7.5 million, as the contribution’s settlement period would cover half of the year.

If the indicated thresholds are exceeded, the above-mentioned entities will be obliged to pay the contributions, whose base is the total revenue from advertising (above the safe harbour). Currently, the proposed rates are as follows:

Advertising on television, radio, cinema, or outdoor media

 Advertising in press
 

2021

2022 and subsequent years

2021

2022 and subsequent years

Advertising goods different than qualified goods

- 7.5% of the contribution base ≤ PLN 25 mln

- 7.5% of the contribution base ≤ PLN 50 mln

- 2% of the contribution base ≤  PLN15 mln

- 2% of the contribution base ≤ PLN 30 mln

-10% on the surplus over PLN 25 mln

- 10% on the surplus over PLN 50 mln

- 6% on the surplus over PLN 15 mln

- 6% on the surplus over PLN 30 mln

Advertising qualified goods

- 10% of the contribution base ≤ PLN 25 mln

- 10% of the contribution base ≤ PLN 50 mln

- 4% of the contribution base ≤ PLN 15 mln

- 4% of the contribution base ≤ PLN 30 mln

- 15% on the surplus over 25 PLN mln - 15% on the surplus over PLN 50 mln - 12% on the surplus over PLN 15 mln

- 12% on the surplus over PLN 30 mln

Contributions from online advertising revenue

The contributions from online advertising revenue will cover entities providing online advertising services in the territory of the RP, whereby according to the bill, online advertising are online services that enable the targeting of advertising to groups of recipients based on their preferences / characteristics, but also:

  • services leading to the creation of an advertising profile of the recipient (including analytical and web traffic research),
  • database selling services,
  • ad auction and access to ad exchange mechanisms services.

Payers of contributions from online advertising revenue are to be service providers which jointly meet the following conditions:

  • the service provider’s revenues or the consolidated revenues of the group of entities to which the service provider belongs exceed EUR 750 million (globally) and
  • the service provider’s revenues or the consolidated revenues of the group of entities to which the service provider belongs from providing online advertising in the territory of the RP exceed EUR 5 million.

The contribution base is calculated as the percentage of the revenue from online advertising, regardless of where it is earned, corresponding to the percentage of advertising recipients located in the territory of the RP. According to the bill, the recipient of an advertisement is deemed to be located in the territory of the RP if the device which was used to receive the advertisement is located in the territory of the RP. The bill also indicates a number of ways how to determine that the recipient’s device is located in Poland.

The contribution rate for online advertising is 5% of the base.

Contributions are non-deductible tax costs.

The law states that contributions from advertising revenues are not tax deductible costs.  Effectively, the contribution is levied on the revenue.

Formal Obligations

Although it is not called a “tax”, the formal obligations related to the new contribution are similar to tax ones: taxpayers (remitters) are obliged to file a relevant declaration, pay the contribution to the Second Silesian Tax Office in Bielsko-Biała, and appoint a representative if they have no seat or permanent place of business in Poland. Moreover, all the obligations resulting from the new law are subject to the Tax Code.

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It is intended that 50% of the income from contributions from advertising revenues would feed into the National Health Fund to help combat the negative effects of the coronavirus outbreak.[1] Nonetheless, the bill does not suggest that contributions from advertising revenues are intended to be temporary, e.g., until the epidemic/emergency status is revoked.

It is also worth remembering that the OCED is still working on the final shape of the proposal for a tax on entities operating in the digital economy The EU has also started its preparations in this direction, opening wide consultations on the possible assumptions and shape of a possible directive in this area. Thus, the draft bill comes as a surprise, as just recently the Polish Ministry of Finance claimed that Poland will wait for the consensus proposal instead of implementing unilateral measures. There has however been voices raised that the key agenda of the draft law is in fact focusing on conventional media.

It is difficult to say with full certainty what will be the further evolution of the proposal, but undoubtedly its shape, ambiguities and the way of communication have already raised a lot of controversy, and, i.a., resulted in a one-day strike of some private media. Its appearance, however, signals what in a sense was inevitable - the beginning of a more "local" discussion on this type of taxes in Poland.

The bill is currently at the pre-consultation stage.

[1] The remaining 50% will be divided between funds dedicated to culture and monument renovation.