Tax solutions key to capital market development
Among the numerous ideas for stimulating the Polish capital market, tax incentives are only sometimes mentioned. Meanwhile, they may be a key element in encouraging the attractiveness of investing on the regulated exchange and in investment funds. Both investors and issuers make decisions taking costs into account, and tax burdens significantly affect their amount, writes Grzegorz Keler of Thedy & Partners in Parkiet.
The government is currently working on changes to the capital gains tax, known as the Belka tax. It is already known that the tax-free amount will be significantly lower than the originally announced PLN 100 thousand – according to the MF, it is to be equal to the product of this amount and the NBP deposit rate. There is little consolation in the fact that it will be calculated separately for bonds and term deposits and for equity investments. In practice, the changes will be so cosmetic that they will not significantly affect Poles’ investment decisions.
Practice in other countries
Capital gains taxation in many other European countries is significantly lower than in Poland. This effect is achieved in various ways. In some countries, the flat tax rate is low – for example, in Romania and Bulgaria it is 10%. Belgium, on the other hand, taxes income from capital investments only if it is related to professional activities. In the Czech Republic, there is a tax-free amount equivalent to approximately PLN 17,500. In the UK, the free amount is higher at GBP 6 thousand. Moreover, a lower tax rate of 10 per cent applies to the GBP 37.7 thousand threshold. Against this background, the government’s proposal appears to be very cautious.
Additional preferences
Of course, the Ministry of Finance’s caution is driven by concern for the state of the budget. However, since the discussion about changes in the taxation of income from capital investments has started at all, it is worth considering the introduction of additional preferences for investments that meet certain criteria. Directional reliefs do not hit the state budget revenue so hard, while allowing certain types of investments to become more attractive. For example, Slovakia favours long-term investments – income from shares in public companies held for at least one year is tax exempt. In Luxembourg, the period is six months. Poland also provides for this possibility, but only for shares taken up in an IPO, if the shares are sold more than three years after the debut. A simple tax system should be the goal of the legislator, but if the budgetary situation does not allow for real incentives for all investments, it should be considered for at least some. Such a solution could be an exemption for income from shares after a certain period of acquisition.
You can read the entire article in Parkiet of 21 June 2024, page 11.