Impact of the “2021 income tax changes” on business
It is a signature landmark of the Polish fall, that in late August / early September revolutionary changes in income taxes are announced. And 2020 was no exception. Apart from the new obligation concerning tax strategies, the following changes in particular are worth noting when establishing your 2021 tax plan:
- Mergers and business acquisitions - as of 1 January 2021, the tax impact of mergers and going concern acquisitions and contributions should be carefully analyzed with respect to utilization of tax losses. In many cases, both in the case of upstream or downstream merger, as well as going concern or OPE contribution and acquisition, it may not be possible to effectively recognize tax losses of the surviving entity. What is more, one should discuss how the new law may influence recognition of tax loses also with respect to mergers / contributions / acquisitions that were completed prior to 2021.
- Liquidations - in case a Polish company (PolCo) is liquidated, transfer of its assets as liquidation proceeds will be subject to CIT for the PolCo (apart from WHT in Poland, the PS Directive exemption is not available).
Taxation of limited partnerships
– in general, as of 1 January 2021, limited partnerships will become CIT tax payers in Poland. It is possible to extend the current tax transparency status of the SK until 30 April 2021. There is no guidance as to what formalities should be completed to postpone the CIT taxation. As it is however a SK’s decision to maintain the current tax status, it would be recommended that the board of the unlimited partner (GP) take the relevant resolution and discuss its communication to the tax office still in 2020. It may also be necessary to discuss certain other decisions (such as if the SK’s books should be closed at the year’s end – which is optional).
Depreciation in Special Economic Zones (SEZs)
– for the entities operating, i.a., in SEZs one of the key changes will concern limitations of flexibility to increase or decrease rates used for depreciation of fixed assets. The fixed assets entered into the fixed assets’ register after 31 December 2020 will have to be depreciated with the standard rates.
More information about the 2021 income tax changes can be found in our previous post here