Articles & Publications

Anticipating the Fiscal Landscape of 2024: Limited Tax Adjustments Expected

In recent times, the commencement of each new year has often heralded a barrage of tax law modifications, with new regulations swiftly introduced and taking effect in a short span after their announcement. The initial weeks of the year were typically dedicated to scrutinizing extensive guides and summaries of these changes, with businesses and tax professionals grappling to comprehend and adapt to the evolving regulatory landscape.

A Departure from the Norm in 2024

Contrary to this pattern, the dawn of 2024 brings about a departure from the norm. The year unfolds with a noticeable reduction in the volume of tax law amendments. Entrepreneurs and tax practitioners are not thrust into the customary routine of delving into copious guides and dissecting changing regulations. While there may not be a sweeping revolution in tax law comparable to initiatives like the Polish Deal (Polski Ład), the challenges for businesses in the coming year are by no means trivial.

National e-Invoicing System Takes Center Stage

A pivotal moment on the horizon is the implementation of the National e-Invoice System in July. Companies are tasked with the imperative of constructing, adjusting, and integrating their accounting systems to facilitate the issuance and transmission of invoices under the KSeF framework. This undertaking extends beyond mere adjustments to accounting systems, necessitating updates to invoicing processes, procedures, contracts, and ancillary documents. Entrepreneurs and tax professionals bear the brunt of this substantial workload in preparation for the imminent shift.

Quality Concerns Surrounding Tax Legislation

As 2024 unfolds, a new government and leadership in the Ministry of Finance instill a sense of optimism. The absence of proclamations heralding a tax system revolution engenders hope for heightened stability and predictability. This shift is particularly significant given the tumultuous preceding years marked by erratic and superfluous changes, which posed obstacles to sound business decision-making. Businesses are optimistic that the new leadership will prioritize the rights and interests of entrepreneurs, fostering a more inclusive debate on business needs and expectations. The anticipated legislative measures should aim at creating an environment conducive to business development, moving beyond a mere focus on maximizing the tax burden.

Navigating the Agenda

The credibility of these commitments will be subjected to scrutiny during deliberations on crucial business-related issues. Topics such as the restructuring of health insurance premium payment systems for entrepreneurs and the reversion to lump-sum contributions, along with the collaborative development of new definitions for property taxation purposes, will test the government’s resolve. The existing definition of structures, deemed unconstitutional by the Constitutional Tribunal, is set to expire at the end of the year. Equally pivotal will be the enactment of legislation aligning with the EU directive on the global minimum tax for corporations, impacting larger companies.

A Time for Strategic Evaluation

As we step into 2024, it should serve as an occasion for contemplation on rectifying flawed tax legislation, eliminating unnecessary ambiguities, and streamlining onerous reporting and procedural requirements. The overarching objective should be refinement rather than revolution in the tax system, addressing pertinent changes without disrupting the overall fiscal landscape.

The duty to enable the restoration of a deadline arising from the provisions of material tax law – the normative and axiological context of law and court judgments. Warsaw, January 10, 2024.

In the case of our client, the administrative court confirmed that the restoration of deadlines in tax law is not only permissible but even obligatory. It appears to be one of the most important judgments issued by Polish administrative courts in recent times.

According to the court in tax proceedings regarding the correctness of a taxpayer’s use of a 6-month deadline to report the acquisition of property or property rights to the competent head of the tax office, the tax authority is obliged – if a failure to meet the deadline for submission is identified – to enable the taxpayer to restore the deadline.

The basis for such a claim is Article 15zzzzzn[2] of the Act of March 2, 2020, on special solutions related to preventing, combating, and combating COVID-19, other infectious diseases, and crises caused by them.

According to the court, in the event of a taxpayer’s failure during the state of epidemic declared due to COVID-19 in the period of performing actions shaping his rights and obligations, this provision imposes an obligation on the tax authority to:

  • inform the taxpayer about this failure, and additionally
  • designate a 30-day period for the taxpayer to submit a request for the restoration of the deadline.

This means that the tax authority has a normative obligation to enable the taxpayer to apply for the restoration of the deadline ex officio. Usually, the taxpayer (party to the proceedings) must independently initiate the appropriate procedure to take advantage of the possibility of restoring the deadline. This time, however, it is the opposite.

The state of epidemic was declared on March 20, 2020, and revoked on May 16, 2022. If the state of epidemic occurred during the expiration of the deadline for a particular taxpayer resulting from Article 4a(1)(1) of the Inheritance and Gift Tax Act, then the aforementioned Article 15zzzzzn[2] of the Act of March 2, 2020, will apply. This provision also applies in the situation of a failure to meet deadlines arising from tax law. Based on this, it can be assumed that the possibility of restoring the deadline in the above manner also applies to other cases regulated by other tax laws.

The court pointed out that the interpretation conducted in the resolution of the Supreme Administrative Court under file no. I FPS 2/22 does not concern the above, especially since its reasoning stated that “when the legislator used the phrase ‘provided for by provisions of administrative law,’ understanding this provision in a way that puts the taxpayer at a disadvantage is inadmissible.” Therefore, both the normative and axiological context of the aforementioned resolution should be taken into account. Based on this, it can be assumed that the possibility of restoring the deadline in the above manner also applies to other cases regulated by other tax laws.

Bernard Łukomski
Legal Counsel
Tax Advisor
tel. +48608093541
WhatsApp +48 692 802 229

Polish Local Minimum Income Tax

Minimum Corporate Income Tax

Starting January 1, 2024, the provisions for the minimum corporate income tax will be reinstated.

The 10% minimum tax will be applicable to companies with Polish tax residency and domestic tax capital groups under specific conditions within the tax year:

  • Incurring a loss from a source of income other than capital gains, or
  • Achieving less than 2% of profit concerning non-capital gains income from a source other than capital gains to the respective profit.

Special rules are outlined in tax regulations for determining the loss concerning minimum tax, implying that an accounting loss doesn’t automatically result in minimum taxation.

It’s crucial to note that tax simulations conducted a few years back might not align with the rules changed from January 1, 2023. With this amendment, the calculation methods for loss and profitability levels have been revised, and the range of entities exempted from minimum taxation has expanded.

For taxpayers operating with a tax year different from the calendar year, the minimum tax provisions will come into effect from the tax year starting after December 31, 2023.

Tax Base

The tax base, in essence, amounts to 1.5% of income from operational activities, considering exclusions and deductions, with a critical emphasis on accurately identifying related parties and their transactions.

Which Entities are Affected?

The minimum tax may impact companies in sectors facing low profitability or temporary losses, such as:

  • HORECA
  • Transport
  • Real estate
  • Manufacturing
  • Processing
  • Wholesale and retail trade

Whether a loss or profit below 2% adheres to the arm’s length principle is inconsequential.

Tax Lawyer in Warsaw

If you’re seeking a tax lawyer in Warsaw, our law firm is well-equipped to assist. Poland’s tax landscape is constantly evolving, especially concerning both local and cross-border regulations, posing significant challenges for businesses and individuals alike. Lately, tax authorities have ramped up investigations, increasing their complexity and frequency, signaling a continued enforcement trend.

Navigating this requires a multi-faceted approach and precise tax adjustments to optimize effectiveness. At Bernard Łukomski’s firm, we possess comprehensive expertise in national and international tax laws. We offer counsel on personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law.

Our services extend to managing tax control and litigation cases, encompassing challenges to tax liability decisions and interactions with tax authorities, administrative courts, and the Supreme Administrative Court. Getting sound tax advice not only minimizes transaction costs but also averts severe penalties and repercussions.

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Transfer tax: changes in purchase of real properties

As of August 31, 2023, there is no longer a transfer tax (abbreviated as PCC in Polish) on the purchase of a first home on the second-hand housing market. Typically, the transfer tax for civil law transactions is 2 percent of the real property price, and in the case of a sales contract, it is paid by the buyer. This relief now exempts the purchase of a second-hand home from this transfer tax.

Under the new regulations, the acquisition of the following is also exempt from transfer tax:

The ownership of a separate flat

The ownership of a single-family residential building

The cooperative member’s ownership of a residential property, either a flat or a single-family residential building.

These new regulations apply exclusively to individuals who did not previously possess the aforementioned rights, or had a share in these rights that was 50 percent or less, unless it was inherited.

Changes for Investors:

Starting from January 1, 2024, there will be changes for individuals investing in real property. Specifically, the tax rate on a contract for the sale of the sixth flat (or subsequent flats) in the same building(s), or an interest in such a flat, with the same buyer, will be 6 percent. This applies when the buyer:

Acquires at least six flats that are separate real properties in one or more buildings on the same land, subject to VAT, or shares in such flats

Has already purchased at least five such flats or shares in them.

Consequently, the purchase of the sixth flat (and each subsequent one) will incur a double tax – both VAT and a transfer tax of 6 percent.

Real Estate And Construction Law

Our services encompass a wide range of real estate transactions and legal matters, including:

  • Assisting investors in buying and selling real estate properties.
  • Providing representation for landlords and tenants in lease agreements, as well as sale-and-lease back transactions.
  • Representing developers in both commercial and residential projects.
  • Arranging and overseeing due diligence reviews.
  • Advocating for clients in proceedings to secure permits and administrative decisions during the construction process.
  • Offering guidance in structuring and financing documents for diverse investment projects.
  • Advising on and defending against restitution claims.
  • Providing counsel on the corporate aspects of all transactions.
  • Offering expertise in construction issues, both contentious and non-contentious, along with matters related to land use, planning, permitting, and environmental concerns.
  • Crafting and negotiating various agreements and documentation essential for the investment or construction process.

PEPP – pan-European Personal Pension Product

The pan-European Personal Pension Product, known as PEPP, officially became law on September 26, 2023. PEPP is a European pension plan designed to offer supplementary income in addition to both the state pension and its associated support structures.

Who is Eligible?

Any individual residing within the EU can take advantage of PEPP, regardless of their employment status. This includes individuals who are unemployed, on maternity leave, or currently enrolled as students. Participation is voluntary, allowing anyone to join and contribute funds, up to an annual limit set at three times the average monthly salary in the national economy per year.

Portability Across the Union

PEPP is portable across the entire European Union. This means that individuals who change their place of residence within the EU can continue to contribute to the PEPP account they originally opened in their previous country of residence. Simultaneously, these individuals retain all the benefits associated with ongoing investments in the same product. It’s important to note that only one saver can accumulate savings in a PEPP account, preventing the option of opening a joint PEPP sub-account, such as for spouses.

PEPP Providers

PEPP will be offered in all EU member countries by financial entities authorized to create and distribute PEPPs. These providers may include institutions such as credit entities, insurance firms, pension companies, and investment firms. Any provider wishing to offer a PEPP must undergo a registration process. Once registered, the product can be made available and distributed throughout the EU.

Tax Advantages

PEPP savers will be exempt from personal income tax under specific conditions. This exemption is available to those who:

Do not withdraw their accumulated savings until they reach the age of 60.

Become eligible for retirement, are at least 55 years old, and have been PEPP savers for a minimum of five years.

Have contributed more than half the value of their PEPP contributions no later than five years before their withdrawal request.

Tax Lawyer – Poland

The law firm of Bernard Łukomski has in-depth knowledge and expertise in national and international tax laws and we advise our clients in all aspects of personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law. We can help you to manage tax control cases in addition to managing tax litigation cases including challenging tax liability decisions and dealing with tax authorities, tax administrative courts and the Supreme Administrative Court. Receiving the correct tax advice often reduces transaction costs and can avert serious penalties and consequences.

Artificial Intelligence and the Law

The surge in interest surrounding the implementation of artificial intelligence (AI) solutions to enhance efficiency and gain a competitive edge is the latest trend. However, concerns about legal compliance, particularly in light of pending EU regulations addressing AI, are of utmost importance.

Artificial Intelligence Regulatory Landscape

Currently, there exists no universally applicable legislation imposing specific obligations related to AI. However, this is expected to change in the near future. The finalization of the core act, known as the “Artificial Intelligence Act,” which establishes standardized rules on AI, is scheduled for later this year. The Commission, Parliament, and Council are currently engaged in negotiations to determine the final wording of this act. It will primarily impose obligations on both AI system providers and entities using AI systems under their control.

The Artificial Intelligence Act aims to establish a legal framework for the development and deployment of AI systems within the EU. Its primary objective is to ensure that AI technologies are employed in a manner that is transparent, accountable, and respects fundamental rights and values.

Common Concerns about Artificial Intelligence

In addition to regulations specific to AI, it is crucial to analyse AI usage within the framework of existing legislation. Frequently raised questions include:

  • Determining ownership rights over AI-generated outputs (completions) and establishing usage protocols, including the consequences of integrating such outputs with the client’s proprietary solutions.
  • Allocating liability for intellectual property infringements resulting from the use of AI solutions and completions/materials generated by generative AI (e.g., identifying the entity responsible for copyright claims when third-party materials were used in training models).
  • Addressing potential access by the AI system provider to data inputted into the model, particularly during content analysis and filtering to ensure proper usage.
  • Utilising client data for further training of the provider’s models.
  • Ensuring compliance with GDPR, especially in terms of upholding data subject rights and implementing requirements related to automated data processing (including profiling), as well as addressing issues of inaccurate personal data generated by AI solutions.

Solutions to these concerns can primarily be found within the contract with the AI system provider and technical documentation detailing data flow or service configuration options.

Furthermore, evaluating necessary adjustments within the client’s organisational structure is crucial to ensure lawful AI usage and mitigate solution-specific risks (e.g., over-reliance on AI systems or potential misinterpretations by AI solutions). These efforts often involve formulating appropriate usage policies for AI, updating data protection documentation, and implementing protocols for human oversight of AI-generated content.

When identifying legal risks and their solutions, it is worth remembering that there are considerable differences not only between different versions of AI solutions but – most importantly – between AI service providers, especially regarding the ways in which they regulate the above issues in their contracts or in the architecture of their services. The situation in this area is often very dynamic – for example, recently Microsoft published the Microsoft Copilot Copyright Commitment which states that, starting October 1st, Microsoft will extend existing contractual liability rules for intellectual property infringement with regard to commercial Copilot services and Bing Chat Enterprise. As a result of the above, Microsoft will defend the customer and pay any amounts awarded in adverse judgments/settlements in the event that the client is sued by a third party for infringement of intellectual property rights through the use of Copilot services or the generated responses (excluding trademarks). To benefit from the above, it is necessary to use the protections and content filters built into the services by Microsoft and not to use the services intentionally to create infringing materials. The obligation to defend against claims related to the use of AI-generated content by AI systems is undoubtedly an important change in the approach to the client, and may facilitate any decision regarding using AI.

Implementing AI is already possible Despite many valid points regarding the risks of using AI, what is common for new technologies, it should not be assumed, without further analysis, that implementing such systems in an organization is currently not possible, particularly given the still-ongoing work on the AI Act. The regulations which are in force in Poland do not generally prohibit the use of such solutions. However, it is important to approach this topic thoroughly, including by properly defining the rights and obligations of the user and the AI solution provider, defining the ways in which AI solutions can be used in the organization as well as adjusting internal procedures. Many entities are already using this technology in their daily work, showing many interesting applications of AI (e.g. efficient document review, performing summaries and analysis of large amounts of text) and how many further benefits it can bring.

Housing affordability: What Can an Average Salary Buy in Terms of Square Meters of Housing in Poland?

Examining Housing Affordability in Poland’s Largest Cities

In the realm of housing demand and affordability, Poland mirrors global concerns. A recent study by RynekPierwotny.pl delved into the housing markets of the ten largest Polish cities, gauging how many square meters of real estate an average salary can secure. The findings, listed in ascending order of affordability, are as follows:

Source information – Click here.

Katowice—0.87 square meters.

Bydgoszcz—0.77 square meters.

Poznan—0.72 square meters.

Gdańsk—0.72 square meters.

Łódź—0.69 square meters.

Lublin—0.68 square meters.

Kraków—0.66 square meters.

Wrocław—0.66 square meters.

Szczecin—0.63 square meters.

Warsaw—0.59 square meters.

A stark disparity emerges, with Warsaw standing as the least accessible city to purchase a home. Here, only 0.59 square meters of residential real estate can be acquired for an average salary.

High earnings

Interestingly, high earnings don’t always align with elevated housing prices. Katowice serves as an example, where earnings are relatively high, yet housing costs remain modest. Conversely, Szczecin presents the inverse scenario, with lower wages but real estate options tailored towards wealthier clientele.

Of note are Gdańsk and Bydgoszcz, shining in terms of housing affordability, boasting 23 properties per thousand inhabitants. In contrast, Szczecin faces a less favorable situation, offering only 12 properties per thousand residents.

Keeping an eye on the housing market reveals intriguing shifts. Over the past year, Katowice, Lublin, and Łódź saw a notable surge in real estate options, with increases of 34%, 17%, and 5%, respectively. Conversely, cities like Warsaw, Kraków, Gdańsk, and Poznań witnessed a decline in available housing opportunities.

Real Estate And Construction Law

Our experience in real estate and construction law matters includes:

  • Representing investors with the purchase and sale of real estate;
  • Representing landlords and tenants in lease and sale-and-lease back real estate transactions;
  • Representing developers in commercial and residential projects;
  • Organizing and conducting due diligence reviews;
  • Representing clients in proceedings to obtain permits and administrative decisions in the construction process;
  • Advising in connection with the development of structure and finance documents under various investment projects;
  • Advising on and defending against restitution claims;
  • Advising on corporate aspects of all transactions;
  • Advising on construction issues (contentious and non-contentious), land use, planning, permitting and environmental issues;
  • Drafting and negotiating agreements and other documentation required in the investment or construction process.

As it is very important that every transaction, investment project or any other decision we make is tax efficient and tax secure we also advise our clients on taxation of numerous real estate transactions (e.g. purchase / sale of land real estate & building real estate).

Demographic Struggles: Poland Anticipates Significant Population Decline by 2060

Poland, much like numerous other nations, grapples with significant demographic hurdles. According to projections from the Central Statistical Office of Poland, the country’s population could dwindle by nearly a third, reaching 27 million people by 2060. Let’s delve into the factors influencing this process.

Present Demographic Landscape

As of the close of the previous year, Poland was home to 37.7 million inhabitants. Projections suggest that by 2060, the population may diminish by anywhere from 8% to 29%, contingent on the scenario.

Diminishing Birth Rate

Between the onset of this year and June 2023, Poland welcomed 139.5 thousand new-borns, marking the lowest count since the conclusion of World War II. Experts foresee further deterioration. Under the pessimistic scenario, by 2060, the count of new-borns might plummet by half, totalling just around 152 thousand.

The dwindling fertility rate also influences the demographic panorama. In 2022, the rate stood at 1.26, and forecasts indicate it could decline to 1.19. Notably, these figures fail to meet even the minimal criteria for straightforward generational succession, necessitating a coefficient of 2.1.

Effects of Abortion Legislation

The reduction in the count of women within reproductive age groups adds to this predicament. In recent years, shifts in Polish legal frameworks, notably the tightening of abortion regulations, have negatively impacted the demographic scenario. These changes may impede family planning and heighten the risk of clandestine procedures.

The Role of Immigration

To counterbalance population decline and sustain economic vitality, Poland must actively allure immigrants. As of June 2023, the nation boasted over a million foreign laborers, primarily hailing from Ukraine. However, competition with neighbouring nations like the Czech Republic, Slovakia, and Germany could exacerbate the situation, potentially diminishing Poland’s appeal to prospective immigrants.

Aging Population

With a reduction in the number of working-age citizens and an upswing in retirees, Poland confronts substantial challenges in the realms of healthcare and social security. The count of individuals aged 65 and above could surge by over 80%, placing substantial strain on healthcare and pension systems.

By 2022, for every 100 working-age individuals, there were 70 who were not in the workforce. However, according to the “medium” scenario, by 2060, the ratio could skew towards 105 working-age individuals for every 100 non-working individuals.

Poland Implements Reduced Rates for Late Payment Interest

Late payment interest

On September 15, 2023, Poland released an Announcement from the Ministry of Finance regarding the interest rates for tax arrears and late payments. This announcement includes the following reductions in interest rates:

Source information: https://www.dziennikustaw.gov.pl/MP/2023/1017

Late payment interest rates

The standard rate has been lowered from 16.5% to 15.0% per annum.

The reduced rate has been decreased from 8.25% to 7.50% per annum.

The increased rate has been brought down from 24.75% to 22.50% per annum.

Reduced rate

The reduced rate is applicable when a taxpayer initiates self-correction prior to receiving a notice of procedures for an amended assessment, and the payment is made within 7 days of filing the corrected return. Conversely, the increased rate is enforced for VAT and customs duties, including situations where a taxpayer understates their tax liability, overstates an overpayment or refund claim, or neglects to file a return and pay tax, and this is discovered during tax control proceedings.

For further information about late payment interest or any other tax matters, please contact Bernard.

Tax Lawyer Poland

If you are looking for a tax lawyer in Warsaw, our law firm can help you. The tax landscape in Poland is forever evolving, particularly when dealing with cross-border and local tax regulations and this presents businesses and individuals with a significant challenge. Recently, there has been a noticeable increase in the number and complexity of tax investigations conducted by authorities and it is expected that enforcement will continue to gather pace.

The requirement for tax adjustments and a multi-disciplinary approach to maximise tax effectiveness is rising accordingly. The law firm of Bernard Łukomski has in-depth knowledge and expertise in national and international tax laws and we advise our clients in all aspects of personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law.

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Navigating Post-Divorce Child Contact Arrangements in Poland

Child contact

Embracing a new chapter post-marriage dissolution can be intricate, especially when it comes to matters involving children. Commonly, after the bonds of matrimony fray, parents find themselves at odds over crucial child-related decisions. Setting up a coherent visitation schedule becomes a daunting task, often leading to one parent limiting the other’s interaction with the child.

In the context of divorcing couples with shared minor children, Polish courts play a pivotal role in delineating the contours of contact arrangements. The divorce decree becomes a canvas upon which the schedule of interactions between the non-custodial parent and the children is artfully painted. This court-sanctioned schedule is binding, carrying the weight of legal consequences if not adhered to.

The exception to this rule surfaces when both spouses unite in a joint request to keep child contact matters outside the divorce decree. In this scenario, the court refrains from imposing a schedule.

Child contact encompasses a gamut of interactions, spanning from maintaining correspondence to leveraging digital avenues like WhatsApp, Skype, and phone calls. Additionally, it includes physical presence in the child’s life, encompassing visits, meet-ups, and even the potential for the parent to take the child abroad as part of these interactions.

The granularity of contact arrangements is subject to variation. Some cases call for meticulously crafted schedules with fixed dates and hours for interactions, while others adopt a more fluid approach, where each interaction is individually agreed upon by the parents.

However, the court’s role isn’t solely confined to establishing a roadmap for contact. It also wields the authority to curtail or shape these interactions for the child’s best interests. These limitations may involve restrictions such as disallowing in-person meetings, preventing the child’s relocation from their permanent residence, or even mandating the presence of a guardian, probation officer, or court-appointed individual during interactions.

In extreme cases, the court can completely halt contact if it deems that the child’s well-being is at stake. Decisions surrounding contact arrangements aren’t static; they can evolve over time based on changing circumstances or new evidence.

Engaging in legal proceedings involving child contact is a nuanced journey, particularly when international elements come into play. Cases involving cross-border parental residence, potentially impacting the child’s travel, add an extra layer of complexity. In such situations, seeking guidance from a dedicated Family Law Firm in Poland becomes indispensable. These experts adeptly navigate the intricacies of court proceedings, ensuring that your requests are eloquently presented and substantiated by compelling evidence – all aligned with the child’s best interests.

Our team of experienced family lawyers stands ready to walk with you through the labyrinthine corridors of court proceedings in Poland. Don’t hesitate to reach out – we’re here to guide you toward a resolution that safeguards the well-being of your child while respecting your rights as a parent.

For further information, contact Bernard:

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)