Securing a tax position for Polish investments: Investment Agreement and Co-operative Compliance Program
For some time now, we have been observing the increasing complexity of tax law, not only in Poland but also on the international arena. In Poland, however, this trend has been very pronounced in recent years. Not only have the tax laws themselves changed significantly (a lot of new regulations have been introduced or existing ones have been significantly modified), but also their interpretation.
In addition, the progressive digitalization of tax settlements, as well as the accelerating ESG trend, also in the tax field, are increasingly causing companies operating in Poland to be interested in solutions that can help strengthen tax security in a broad sense.
One of the solutions gaining in popularity is the Co-operative Compliance Program, the pilot of which was launched in July 2020. The program is based on the idea of cooperation between the taxpayer and tax authorities, known from the international ICAP program. To this end, the largest taxpayers with revenues of more than EUR 50 million / year were allowed to apply for a special agreement with the Head of the National Revenue Administration (NRA).
Such an agreement allows - with appropriate transparency of actions on the part of the taxpayer - to obtain certain privileges. The scope of privileges is subject to individual agreements, but the key one is the possibility of confirming with the head of the NRA the taxation principles of particular aspects of the taxpayer's activity and also dedicated service to the taxpayer by the Ministry of Finance and to some extent – priority treatment.
Depending on the maturity of the tax function of the tax payer, preparation to apply to the Co-operative Compliance Program may be more or less time consuming. However, based on our experience, the process itself can prove very helpful to define and mitigate upfront potential risks in tax management.
So far, seven taxpayers have signed the agreement, which taking into account the slowdown caused by the COVID-19 pandemic and the very early stage of the program, should be treated as optimistic.
The second option for Polish and foreign investors to secure their tax position is to conclude an Investment Agreement.
This new tool (available from 1 January 2022) in one application combines five different advanced tax rulings:
- individual tax ruling
- advance pricing agreement
- individual tax ruling with respect to anti-avoidance rules
- binding rate information
- binding excise duty information
An application for an Investment Agreement can be submitted by anyone who plans or has started a new investment in Poland worth PLN 100 million (approx. EUR 21 mln, PLN 50 mln starting 2025). The definition of new investment is broad and covers, i.a. investment in tangible or intangible assets related to the set-up of a new facility or extension of capacity of an existing facility, but also acquisition of assets of the facility (other than shares only) from a non- related seller.
An Investment Agreement is binding for a maximum period of five years (unless terminated earlier by the investor) and may be drawn up simultaneously in Polish and English.
The Investment Agreement is binding both for the investor and for the tax authorities competent for the investor’s settlements.