There will be clarifications on the tax on flipped income
The Ministry of Finance has launched a tax consultation on the draft tax clarification on the tax on flipped income. The consultation will run until 10 July 2023.
The subject of the consultation is the flipped income tax provisions introduced in the Corporate Income Tax (CIT) Act, with effect from 1 January 2022, and amended with effect from 1 January 2023.
– The draft explanations run to 46 pages and are divided into 10 parts. In the prepared document, the Ministry reminds that, in order to determine whether an expense is subject to the tax on pass-through income, the taxpayer should first verify whether the basic prerequisites for the tax are present. These are the prerequisites in terms of: identification of payments of a passive nature (indicated in Article 24aa(3)) to foreign related parties; settlement of a given cost, in a given tax year, as a tax deductible cost; exceeding the so-called safe harbour threshold. The MF suggests in the prepared document that in the first stage, the taxpayer should analyse the occurrence of these basic prerequisites, relating primarily to its own tax settlements or not requiring knowledge of the detailed settlements of the related entity and additional confirmations on its part. If the indicated basic prerequisites are met, in the next step, the taxpayer should examine whether the foreign related party satisfies the three cumulative conditions evidencing a transfer of income or whether the specific prerequisites listed in particular in Article 24aa(14) and (15) apply or whether the related party carries out substantial real economic activity in an EU or EEA state, explains Cyprian Werykowski, tax adviser, director at Thedy & Partners.
The explanations also include chapters on, among other things: related party conditions, the substantial real economic activity clause, sample documents proving the foreign entity’s failure to meet the prerequisites for pass-through income, tax return and settlement.
Link to the draft Explanatory Notes: Konsultacje podatkowe w sprawie projektu objaśnień podatkowych w zakresie podatku od przerzuconych dochodów – Ministerstwo Finansów – Portal Gov.pl (www.gov.pl)