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The History of Litigation

Litigation has been an integral part of the legal system for centuries. It refers to the process of resolving disputes through the court system. The history of litigation is a fascinating story of how people have sought justice and resolution of disputes throughout time. Here is a brief overview of the history of litigation.

Ancient Times

The earliest known litigation systems date back to ancient civilizations, such as Egypt, Greece, and Rome. These societies had well-established legal systems that were designed to resolve disputes between citizens. In ancient Egypt, the pharaoh was considered the ultimate judge, and he had the final say in all legal matters. In ancient Greece, citizens would present their cases in front of a jury of their peers, who would then decide the verdict.

Middle Ages

During the Middle Ages, the legal system in Europe was dominated by the Catholic Church. The church was responsible for adjudicating disputes between citizens, and its courts were staffed by trained legal professionals. However, as the power of monarchs grew, they began to establish their own court systems, which eventually led to the development of a common law system.

Modern Era

The modern era of litigation began in the 19th century when the Industrial Revolution created new forms of commerce and trade. The growth of business and industry led to an increase in legal disputes, and the court system had to adapt to this new reality. As a result, the legal profession became more specialized, and new areas of law, such as corporate law, emerged.

In the 20th century, litigation became an increasingly complex and specialized area of practice. New forms of dispute resolution, such as arbitration and mediation, emerged as alternatives to traditional litigation. The use of technology also revolutionized the legal system, making it easier to gather and analyze evidence.

Today, litigation is a critical aspect of the legal system. It is used to resolve disputes in a wide range of areas, from personal injury claims to complex commercial disputes. The process of litigation can be lengthy and expensive, but it is a crucial way to ensure that justice is served and that disputes are resolved in a fair and impartial manner.

Litigation is an essential aspect of the legal system, providing a way for individuals and organizations to seek redress for grievances in a court of law. As society and technology continue to evolve, litigation has also undergone significant changes. From the emergence of alternative dispute resolution to the rise of complex multi-jurisdictional cases, the history of litigation reflects the evolution of the legal profession over time.

Alternative Dispute Resolution

Alternative dispute resolution (ADR) is a process of resolving disputes outside of the traditional court system. ADR includes methods such as mediation and arbitration, which are often faster and less expensive than litigation. Mediation involves a neutral third party who helps the parties reach a mutually acceptable agreement. Arbitration is more formal and involves an arbitrator who hears evidence and makes a decision. ADR has become increasingly popular as a way to resolve disputes, particularly in business and commercial settings.

Multi-Jurisdictional Cases

The growth of global commerce and interconnectedness has led to an increase in multi-jurisdictional cases. These cases involve legal disputes that cross national borders and involve multiple legal systems. Multi-jurisdictional cases are often complex and require specialized knowledge of different legal systems. The rise of multi-jurisdictional cases has led to the development of international law and the need for legal professionals with expertise in this area.

Technology and Litigation

Technology has had a significant impact on litigation. The use of electronic discovery, which involves the collection and analysis of digital information, has become a critical part of the litigation process. Social media and other digital platforms have also become sources of evidence in legal disputes. The use of technology has also led to the emergence of new legal issues, such as data privacy and cybersecurity.

Conclusion

The history of litigation is a story of how people have sought justice and resolution of disputes throughout time. From ancient civilizations to the modern era, the court system has adapted to meet the changing needs of society. Today, litigation remains a critical aspect of the legal system, ensuring that disputes are resolved in a fair and impartial manner. As the world continues to change, the legal profession will continue to adapt to meet the challenges of the future.

The history of litigation reflects the evolution of the legal profession over time. Alternative dispute resolution has emerged as a popular way to resolve disputes outside of the traditional court system, while the rise of multi-jurisdictional cases has created new challenges for legal professionals. Technology has had a significant impact on litigation, leading to the emergence of new legal issues and changing the way evidence is collected and analyzed. As society and technology continue to evolve, the legal profession will continue to adapt to meet the challenges of the future.

How we can help

Welcome to our Litigation section. Our legal team specializes in a wide range of litigation court proceedings, and we have the necessary knowledge and expertise to provide you with the best possible representation in any legal matter.

As litigation lawyers, we offer comprehensive legal services in various areas of litigation, including:

Employment Disputes: We represent clients in disputes relating to employment contracts, wage disputes, and other workplace issues.

Copyrights and Neighboring Rights: Our lawyers specialize in protecting and enforcing copyrights and neighboring rights, including infringement cases and licensing disputes.

Commercial Transactions: We represent clients in disputes arising from commercial transactions, including breach of contract cases and disputes relating to the sale of goods and services.

Personal Rights: We offer representation in a wide range of personal rights disputes, including cases relating to defamation, privacy, and personal injury.

We understand that legal proceedings can be stressful and time-consuming, which is why we work hard to provide our clients with the highest level of professionalism and support throughout the litigation process.

Our experienced legal team will work closely with you to understand the details of your case and provide you with the best possible legal advice and representation. Contact us today to schedule a consultation and learn more about our services. Let us help you navigate the complex world of litigation and achieve the best possible outcome for your case.

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The History of Real estate and construction law

Real estate and construction law have been a crucial aspect of human societies for centuries. As the world’s population grew, so did the need for homes, offices, and other buildings. Along with this, legal frameworks were put in place to regulate the buying, selling, and building of real estate. Here is a brief history of real estate and construction law.

Ancient Civilizations

The first known legal codes regarding real estate date back to ancient Mesopotamia, around 2100 BCE. The Code of Hammurabi, which was one of the earliest known legal systems, contained laws about property and construction. In ancient Egypt, Pharaohs owned all land, and people who wanted to use it had to pay rent. Greece and Rome also had laws governing property, including zoning and construction standards.

Middle Ages

During the Middle Ages, land ownership was a symbol of power, and feudalism was the dominant social structure. The king owned all the land and granted titles to lords, who would then parcel it out to their vassals. The system was complex, and disputes over land ownership were common. Legal frameworks were developed to resolve these disputes, including the first property registry in the English-speaking world, which was established in 1086.

Industrial Revolution

The Industrial Revolution brought about massive changes in the real estate and construction industry. Advances in technology and transportation made it possible to build higher, larger, and more complex buildings. Governments started regulating building codes to ensure the safety of their citizens. In the United States, the National Fire Protection Association (NFPA) was established in 1896 to create and enforce building codes.

Modern Era

In the 20th century, real estate and construction law became more complex, reflecting the increasing complexity of the industry. Governments became more involved in the regulation of property and construction, enacting zoning laws, building codes, and environmental regulations. The growth of technology and the internet has also made it easier to buy and sell real estate and to access legal information.

Today, real estate and construction law are critical areas of practice for lawyers. They help individuals and businesses navigate the complexities of buying, selling, and developing property. They also help to ensure that construction projects comply with regulations and laws to protect the health and safety of everyone involved.

Real estate and construction law have been essential for centuries, and they continue to evolve to meet the needs of the modern world. In recent years, there has been a growing focus on sustainable development and the impact of real estate and construction on the environment. As a result, there has been a shift towards regenerative development and an expansion of legal frameworks to address these concerns.

Regenerative Development

Regenerative development is a holistic approach to development that seeks to create systems that regenerate rather than deplete natural resources. This approach recognizes that buildings and infrastructure are not standalone entities, but are part of a larger ecosystem. Regenerative development seeks to create buildings and communities that support the health and well-being of people and the planet.

Legal frameworks are critical in supporting regenerative development. For example, zoning laws can be updated to encourage the development of green spaces and the use of sustainable building materials. Building codes can be revised to require the use of renewable energy and the incorporation of green roofs and walls. Environmental regulations can also be expanded to require developers to consider the impact of their projects on the natural environment.

Expansion of Legal Frameworks

In addition to the focus on regenerative development, there has been an expansion of legal frameworks to address new challenges in the real estate and construction industry. One of the most significant challenges is the rise of short-term rentals, such as Airbnb and HomeAway. Many cities have responded by enacting regulations to restrict or regulate short-term rentals, often to protect the availability of long-term rental housing.

Another area where legal frameworks are expanding is in the use of technology. The growth of online platforms for buying and selling real estate has created new legal challenges, such as the use of electronic signatures and the protection of personal information. Legal frameworks must keep up with these technological advancements to ensure that transactions are legally binding and that personal data is protected.

Conclusion

In conclusion, real estate and construction law have been essential for centuries, and as the world continues to grow and change, so will the legal frameworks that govern them. As a result, legal professionals in these areas will continue to play a vital role in protecting the rights and interests of their clients.

Real estate and construction law have a rich history, and they continue to evolve to meet the needs of the modern world. Regenerative development and the expansion of legal frameworks are two areas where the industry is seeing significant changes. Legal professionals must stay up-to-date on these developments to provide their clients with the most effective legal representation. By doing so, they can help to create sustainable and equitable communities that support the health and well-being of people and the planet.

How we can help

At KPBL, we pride ourselves on our extensive experience in real estate and construction law matters. Our team of lawyers is well-equipped to handle a wide range of legal issues and transactions in this area of law.

We have a proven track record of representing investors in the purchase and sale of real estate, as well as advising landlords and tenants in lease and sale-and-leaseback transactions. Our expertise also includes representing developers in commercial and residential projects, organizing and conducting due diligence reviews, and representing clients in proceedings to obtain permits and administrative decisions in the construction process.

In addition to our transactional work, we provide valuable advice on tax-efficient and tax-secure real estate investments. Our clients can rely on us for expert guidance on the taxation of various real estate transactions, including the purchase and sale of land and buildings, as well as taking advantage of tax investment relief for residential purposes.

We also advise on avoiding income tax when selling or transferring real estate, both residential and non-residential. Our team is well-versed in recent tax laws, including the tax on revenues from real estate ownership located within the Republic of Poland with an initial value exceeding PLN 10,000,000.

At KPBL, we recognize the importance of understanding the intricacies of real estate tax. We provide comprehensive advice on whether the sale of a given property will be subject to Value Added Tax and the conditions for exemption.

Our team of lawyers stays up-to-date with the latest developments in administrative court jurisprudence and tax authorities’ interpretations to provide our clients with effective legal assistance. We are committed to representing our clients in any disputes with tax authorities should they arise.

For clients seeking official tax interpretations, we are always ready to prepare formal applications that present not only the facts of the case but also extensive legal arguments and positions. Our goal is to present the legal arguments in a clear and concise manner, ensuring a quick and favorable response from the tax authorities.

Contact us today to learn how we can assist you with your real estate and construction law matters.

Go to Real Estate and Construction Law.

The History of Divorce: A Look Back at the Evolution of Marriage Dissolution

Divorce, the legal process of ending a marriage, has a long and varied history that spans back thousands of years. From ancient civilizations to modern times, the laws and attitudes surrounding divorce have undergone significant changes, reflecting the shifting cultural and societal norms of each era.

Ancient Times: Divorce was recognized in ancient civilizations such as Babylon, Egypt, and Greece. However, it was typically restricted to the wealthy and powerful, and was often granted only for limited reasons, such as adultery or cruelty. In these early societies, women were often viewed as the property of their husbands and were not granted the right to initiate a divorce.

The Roman Empire: The Roman Empire saw a significant expansion of the grounds for divorce, including such reasons as abandonment and mutual consent. During this time, the right to divorce was extended to women, who were allowed to initiate proceedings if their husbands failed to fulfill their marital obligations.

The Middle Ages: During the Middle Ages, the Catholic Church exerted significant control over the laws surrounding marriage and divorce. Divorce was not recognized as a valid option and the only way to end a marriage was through annulment, which declared the marriage to be null and void from the beginning. This practice was reserved for the wealthy and powerful and was often used to dissolve marriages for political or financial reasons.

The Reformation: The Reformation marked a significant turning point in the history of divorce. Protestant leaders, including Martin Luther and John Calvin, rejected the authority of the Catholic Church and advocated for the recognition of divorce in certain circumstances, such as adultery or abuse. This was a significant shift from the strict ban on divorce in previous eras.

The Modern Era: In the 19th and 20th centuries, the laws surrounding divorce continued to evolve, reflecting changing attitudes towards marriage and family. In many countries, the right to divorce was extended to the general population and the grounds for divorce were expanded to include such reasons as incompatibility and desertion. The introduction of no-fault divorce, which allows for the dissolution of a marriage without assigning blame, marked a major shift in the laws surrounding divorce and has become a widely accepted option in many countries.

Conclusion: The history of divorce is a rich and varied one, reflecting the changing cultural, societal, and religious norms of each era. From ancient times to the present day, the laws surrounding divorce have undergone significant changes, expanding the grounds for divorce and granting greater rights and freedoms to individuals seeking to dissolve their marriages. Today, divorce continues to evolve, reflecting the changing attitudes and expectations of modern society.

 

Divorce: Understanding the Process and Its Implications

Divorce is the legal process of ending a marriage. It can be a complex and emotional process that requires careful consideration and planning. The process of divorce involves the dissolution of the legal and financial ties between the parties and can have far-reaching implications for both parties.

Grounds for Divorce: In order to file for divorce, a person must have grounds, or a reason, for the divorce. The grounds for divorce vary depending on the jurisdiction, but common grounds include irreconcilable differences, adultery, and abandonment. In some jurisdictions, no-fault grounds, such as irreconcilable differences, are available, while in others, fault-based grounds are required.

Divorce Process: The divorce process typically begins with the filing of a divorce petition, which is a formal request for the court to dissolve the marriage. The petition must be filed in the jurisdiction where either the petitioner or the respondent resides. Once the petition is filed, the respondent has the opportunity to respond and may file a counter-petition, outlining their own requests for the divorce.

Property Division: One of the most complex aspects of divorce is the division of property and assets. The property that is acquired during the marriage is subject to division, and the court must determine how to divide the property in a way that is fair and equitable to both parties. This can include real property, personal property, and financial assets. In some jurisdictions, the court uses a community property system, which divides the property equally between the parties, while in others, the court uses an equitable distribution system, which divides the property based on a number of factors, including the length of the marriage and the contributions of each party.

Child Custody: If the parties have children, the court must determine custody arrangements. This can include physical custody, which determines where the child will live, and legal custody, which determines who has the authority to make decisions about the child’s upbringing. The court will consider the best interests of the child when making custody arrangements, taking into account factors such as the child’s relationship with each parent and the stability of each parent’s home environment.

Alimony: In some cases, one party may be required to pay alimony, or spousal support, to the other party. Alimony is typically awarded to the party who is in a disadvantaged financial position or who has made significant contributions to the marriage. The amount of alimony and the duration of the payments are determined by the court based on a number of factors, including the length of the marriage, the earning potential of each party, and the standard of living established during the marriage.

Conclusion: Divorce can be a complex and emotional process that requires careful consideration and planning. The process of divorce involves the dissolution of the legal and financial ties between the parties and can have far-reaching implications for both parties. It is important to seek the assistance of a qualified attorney to help guide you through the process and ensure that your rights and interests are protected.

 

The History of Taxation

Taxation has been a part of human civilization for thousands of years, dating back to ancient civilizations such as the Egyptians and the Greeks. Throughout history, taxes have been used to finance government operations, fund public goods, and redistribute wealth.

Ancient Egypt: In ancient Egypt, taxes were collected in the form of agricultural products, livestock, and labor. These taxes were used to finance public works projects, such as the construction of pyramids and temples.

Ancient Greece: The Ancient Greeks also used taxes to finance their city-states and their military. The city-state of Athens, for example, imposed taxes on its citizens to pay for the maintenance of its navy and the construction of its Acropolis.

The Roman Empire: The Roman Empire also relied on taxes to finance its vast military and public works projects. Roman citizens were required to pay taxes in the form of money, goods, and services. The Roman tax system was so extensive that it covered not only citizens but also conquered territories and subject peoples.

The Middle Ages: During the Middle Ages, taxes were primarily collected by feudal lords from their serfs and were used to finance the maintenance of castles, roads, and other infrastructure. The Church also collected taxes in the form of tithes, which were used to support the clergy and fund religious institutions.

History of Tax

The Renaissance and Enlightenment: During the Renaissance and Enlightenment, the concept of taxation shifted towards the idea of representation and consent. The monarchs of Europe began to view taxes as a means of financing government operations, rather than a tool of oppression. This led to the creation of parliamentary systems of government and the growth of representative democracies.

The Modern Era: In the modern era, taxes have become a crucial part of financing government operations, funding public goods, and redistributing wealth. The rise of progressive taxation has allowed governments to use taxes to reduce income inequality and promote economic growth.

Today, taxation continues to play a vital role in shaping society and funding government operations. The complexity and scope of modern tax systems have grown significantly, reflecting the changing needs and priorities of society. Despite its history, taxation remains one of the most controversial and debated topics in politics and economics, with different countries having different approaches to taxation.

In conclusion, the history of taxation is a long and complex one, spanning thousands of years and countless civilizations. Despite its many challenges, taxation remains an essential tool for financing government operations and funding public goods, and will likely continue to play a critical role in shaping society for generations to come.

 

Fiscal secrecy versus protection of contractors. Warsaw, January 31, 2023

Tax Ordinance provisions allow all taxpayers to obtain detailed economic and commercial information about their contractors.

The law permits exceptions to fiscal secrecy when disclosure of information is deemed to have greater legal importance. An exemption from fiscal secrecy can be granted to a specific entity upon request for information in the form of a certificate by a business owner, who is a contractor of a taxpayer, regarding events that the taxpayer was required to report in their tax declaration as per tax law provisions.

Information on the activities of entrepreneurs that may be disclosed to their contractors includes:

1) information that the entrepreneur has not submitted or submitted a declaration or other document, which he was obliged to submit under the provisions of tax laws;

2) information about the failure or recognition by the entrepreneur in the submitted declaration or other document, the events to which he was obliged under the provisions of tax laws;

3) information on the entrepreneur’s arrears or non-arrears in taxes resulting from the declaration or other document submitted on the basis of the provisions of tax laws.

The term “contractor” in this context is interpreted broadly. This allows for a wide range of information to be obtained from tax authorities. Both court rulings and legal doctrine support a broad interpretation of “contractor,” including partners and parties to both commercial and non-commercial agreements. The term can refer to general economic relations with a business owner, not necessarily tied to a specific transaction, or to the transaction itself (as per the 2022 Voivodship Administrative Court decision).

The regulations require the entity seeking information to be a business owner. However, there is no such requirement for the entity applying for a certificate. Any individual or entity who is a contractor (in a broad sense) of a business owner may apply for a certificate, regardless of whether they themselves are involved in business activities (as per the 2019 Voivodship Administrative Court decision).

The following objectives were indicated as justification for the introduction of provisions enabling obtaining such information in the draft act amending the Tax Ordinance:

1) protection of taxpayers against raising the consequences of dishonesty of contractors,

2) introduction of a procedure for reliable assessment of contractors,

3) enabling the taxpayer to obtain information about the tax situation of the counterparty.

As a result, taxpayers should be able to obtain information about their contractors beyond their direct transactions. If a contractor accurately records a transaction with a taxpayer but engages in fraudulent activities elsewhere, the goals of the law cannot be achieved. The aim of the law would not be met if verification of contractors was limited only to a narrow aspect of their activity.

Due diligence or caution may necessitate multiple verifications of a contractor. Therefore, it should be possible to obtain information about a contractor’s business activities from tax authorities even beyond the period of transactions between the contractor and the taxpayer requesting the information, which is protected by fiscal secrecy.

Obtaining information in this way is not limited only to VAT settlements, but can and should be used to verify all tax liabilities of our contractors.

Bernard Łukomski
attorney-at-law
tax advisor
phone +48 608 093 541

Taxation of dividends paid by a Polish company to non-Polish individuals. Warsaw, September 6, 2022

According to Polish tax law, there is a general rule that a flat-rate tax of 19% is charged on income paid in the form of dividends.  If a dividend is paid by a Polish company, it withholds tax on that dividend.

The company then transfers the tax withheld to a relevant tax office.  Failure to do so (e.g., failure to withhold tax and/or transfer the correct amount of tax to a tax office) may constitute a violation of fiscal criminal law and may be subject to fiscal criminal liability.  Fiscal criminal liability is borne by specific individuals responsible for the correct tax settlement, not the company itself.

The above standard tax rate (i.e., 19%) may be reduced depending on how this matter is regulated by a double taxation avoidance agreement concluded between Poland and the country of the dividend recipient.

The application for the reduced tax rate resulting from the double taxation agreement is possible providing that the place of residence of the dividend recipient is properly documented with a certificate of his tax residence.  Therefore, one should make sure that the certificate of tax residence meets the conditions set out by the law in order not to be exposed to the aforementioned criminal liability.

For example, according to the OECD Model Tax Convention (a model for countries concluding bilateral tax conventions), dividends paid by a company established in Poland to a resident of a foreign country may be taxed in Poland.  However, the tax charged may not exceed 15% of the gross amount of the dividend.  If the Polish company does not receive a tax residence certificate from the shareholder (i.e., the dividend recipient) or the certificate does not meet certain formal conditions, then the Polish company will not be entitled to apply the reduced tax rate resulting from the relevant double taxation agreement.

Moreover, the fact that the dividend paid (by a Polish company to a resident of another country) will be taxed in Poland does not mean that such a dividend cannot be taxed in that other country, as well. The provisions of most double taxation agreements explicitly stipulate that dividends may be taxed in both countries. On the other hand, if the dividend could be exempt from taxation in that other country (as long as the internal regulations of that other country allow such exemption), it will not result in the dividend not being taxed in Poland.

In other words, foreign rules will not apply in Poland.  A Polish company paying dividends will have to apply Polish tax regulations and will not be able to apply tax regulations of another country.  On the other hand, the recipient of the dividend (i.e., a foreign tax resident) will most likely have to make his tax settlements according to the tax regulations of his/her country of tax residence, taking into account the tax paid (withheld) in Poland.

Therefore, it should be examined if another country has the analogous rules as Poland with regard to dividends received by Polish residents from abroad.  According to Polish regulations, if a Polish tax resident receives a dividend from abroad, his/her income is taxed with 19% Polish tax on dividends.  However, from this calculated amount, he can deduct (provided certain conditions are met) the tax paid abroad (e.g., withheld by a foreign company) but still no more than 19%.  Any difference created in this way is subject to payment to a Polish tax office.  The shareholder (Polish resident) shows both the income and the amounts of Polish and foreign taxes in his annual tax return.

It is worth pointing out that the above general principles may be subject to certain modifications depending, inter alia, on the rules on which a Polish company is taxed. Other circumstances concerning the foreign resident’s relation with Poland or the nature of his ties with Poland may also be relevant.

Bernard Łukomski
attorney-at-law
tax advisor
phone +48 608 093 541

The Polish Deal 2.0: Amendment of corporate income tax

A draft amendment to the CIT Law has recently been published, which is a modification of the regulations which became effective in January 2022. Below we present the most important aspects of the planned changes to the Polish Deal.

Modification and postponement of the entry into force of the minimum income tax rules

The proposed amendments provide that the minimum income tax rules will be suspended for one year (i.e. from 1 January 2022 to 31 December 2022). They would consequently only start to be applied from 2023. In addition, the legislator foresees changes in the construction of the tax itself, in particular:

  1. The profitability index will be increased from 1% to 2% and at the same time the methodology for its calculation will be changed. The following will not be taken into account:
  • Tax deductible costs being the payment under a fixed asset lease agreement
  • Revenues being the value of trade receivables sold to entities in the factoring industry, and
  • Excise duty
  • The calculation of the minimum income tax will change. Currently, the levy is 10% of an amount equivalent to 4% of the value of income other than capital gains and passive expenses (concerning i.e. debt financing and intangible services). The draft does not change the tax rate which is still 10%; however, there will be two alternative methods from which the taxpayer can choose the more favourable one. The basis, depending on the taxpayer’s preference, will be either 4% of the value of revenues or 2% of revenues plus passive costs.
  • Among others, municipal companies, medical entities, small taxpayers, entities in bankruptcy or liquidation and those whose profitability in one of the last 3 tax years was above 2% will not be subject to minimum CIT at all.

Amendment of the regulations on controlled foreign entities/company (CFC)

The modifications to the CFC are based on 3 pillars:

  • Eliminating double or multiple taxation of CFC when cascading dividends in holding structures
  • Clarification of the rationale for the high profitability of a foreign entity relative to the assets held in case of potential disposal of assets during the year
  • Clarification of the definition of a subsidiary.

Amendments to the rules on taxation of flipped income

The aim of the proposed solutions is to eliminate the doubts raised by the business community by i.e.:

  • To include in the scope of the tax on flipped income only costs that are deductible
  • Clarification that the related entity for which the costs are incurred does not have its registered office or central administration in the territory of the Republic of Poland
  • Clarification of the condition concerning 50% of the revenue generated by a related entity and the condition concerning the transfer of revenue to another entity (at least 10%)
  • Simplification of the condition relating to preferential taxation in the country of residence, management, registration or location of the related party.

Changes to withholding tax (WHT)

The new rules aim to ease the WHT mechanism in force from 1 January 2019 by:

  • Exclusion of the application of certain obligations of broadly understood payers with regard to withholding tax on interest and discount on treasury securities (treasury bills and treasury bonds) by extending the material scope of the non-resident taxpayer exemption from income tax to include also treasury bills and bonds offered in the domestic market
  • In addition, the validity of a declaration by the board of directors that, in the exercise of due diligence, the payer was not aware of circumstances preventing the application of a lower withholding tax rate or tax exemption (provided for in an international double tax treaty) is to be extended.

Amendment of the rules on debt financing costs

As regards tax treatment of debt financing costs, the Ministry intends to eliminate interpretation doubts reported by taxpayers. This includes a clear indication that the amount of PLN 3 million or 30% of EBITDA – whichever is higher – will be excluded from tax costs. In addition, the provisions on debt financing costs will not apply:

  • Where the financier of the equity transaction is a bank or cooperative savings and credit union established in an EU or EEA country
  • In the case of debt financing granted to acquire or take up shares or all rights and obligations in entities unrelated to the taxpayer.

Modifications to the Polish holding company (PSH)

The changes are also to apply to holding companies – a new institution, effective from 2022:

  • The right to exempt 100%, and not as at present 95%, of the dividend income received from subsidiaries. In parallel, the holding company will be able to take advantage of the dividend exemption under EU Directive 2011/96/EU (Parent Subsidiary Directive) – this is not currently possible
  • It will be possible to benefit from both types of preferences
  • Introduction of a new definition of domestic subsidiary and foreign subsidiary

The aim of all these changes is to allow more entities than before to benefit from holding exemptions.

Amendments to the rules on flat-rate taxation of company profits

Changes are also envisaged in the provisions on flat-rate corporate income, commonly known as Estonian CIT. The legislator plans to:

  • Introduce modifications to the way income from non-business expenses is determined when assets (e.g. cars) are used for business and other non-business purposes
  • Clarify the condition for extinguishing a tax liability for a preliminary adjustment, i.e. a temporary difference between tax and accounting results, Once the changes have been implemented, it will be clear that the obligation will lapse in full after at least one full flat tax period, i.e. four tax years
  • Modify the deadline for payment of the tax due on the income from the transformation (unambiguous indication that if the tax on the income from the transformation is paid in full, the taxpayer is obliged to pay the tax by the deadline for submission of the CIT-8 return for the tax year preceding the first year of flat-rate taxation)
  • Modify the deadline for the payment of a flat rate on distributed profit income and income from profit to cover losses (also applies to advances on anticipated dividends) and a flat rate on distributed net profit income.

Amendment of the rule on the procedure for the refund of tax on income from buildings

From June 2022, commercial property owners will pay building revenue tax again. This is a result of the abolition of the epidemic status from 16 May 2022.

The procedure for refunding tax on income from buildings will be changed. The legislator plans to specify that the tax will be refunded without the need for a decision when the amount of the refund is not in doubt.

Amendment of the rules on the documentation obligation in respect of “haven transactions”

The amendments are to address the rules on direct and indirect haven transactions:

  1. Elimination of presumption of residency of beneficial owner in tax haven
  2. New reporting limits for indirect tax haven transactions:
  3. PLN 2,500,000 – goods
  4. PLN 2,500,000 – financial
  5. PLN 500,000 – other (“basic threshold”)
  6. Further emphasis on the role of the statement as “sufficient to verify the documentation obligation”

Having regard to the above regulations, which are planned to be introduced by the Ministry of Finance, it should be unequivocally stated that taxpayers will have to face further radical changes, which will significantly affect business operations. For further information, please contact Bernard.

“Blame game” ends as no-fault divorce comes into force

In a move which will benefit many Britons and their children, new landmark divorce reforms were introduced in the UK on 6th April 2022. Aimed at reducing conflict between separating couples, the reforms have introduced the no-fault divorce to remove unnecessary conflict and to ease stress on couples and children.

As part of a wider action to improve the family justice system, the new Act has introduced a new minimum wait of 20 weeks between application and conditional order of divorce. This will offer time to reflect, and potentially turn back, or where reconciliation is not possible to agree important arrangements for the future.

We also see the simplification of the language of divorce to make it more understandable. This includes replacing the terms ‘decree nisi’, ‘decree absolute’ and ‘petitioner’, with ‘conditional order’, ‘final order’ and ‘applicant’.

Following the implementation of the Act the government has also committed to look into further the law around financial settlements after a divorce, such as the dividing of assets or maintenance payments.

The no-fault divorce is the biggest shake up in UK divorce law for more than 50 years, and ends completely the need for separating couples to apportion blame for the breakdown of their marriage, helping them to instead focus on key practical decisions involving children or their finances and look to the future.

Prior to this, one spouse was forced to make accusations about the other’s conduct, such as adultery or ‘unreasonable behaviour’, or face years of separation before a divorce could be granted, regardless of whether the couple had made a mutual decision to separate.

A spouse, or a couple jointly, can now apply for divorce by stating their marriage has broken down irretrievably. It removes unnecessary finger-pointing and ill feeling at a time where emotions are already running high, and spares children from witnessing their parents mudslinging.

Importantly, it stops one partner from vengefully contesting a divorce and keeping their spouse in an unhappy marriage. In some cases, domestic abusers can use their ability to challenge the process to further harm their victims or to trap them in the relationship. The reforms will put an end to this behaviour.

On this website, we have written various posts about divorce that you may find of interest. Please click on this link – Divorce posts.

Polski Ład (Polish Deal). Taxation of the general partner of a limited joint-stock partnership (S.K.A.) – basic aspects. Warsaw, January 24, 2022

If you are looking for a remedy or solution to Polski Ład , you may wish to consider a limited joint-stock partnership (S.K.A.).

A limited joint-stock partnership can be a very effective form of running a business post the introduction of the Polish Deal.

The advantages to the general partner in relation to the taxation of a limited joint-stock partnership are presented below:

– income tax in the amount of approximately 17.3%, if S.K.A. is a “small taxpayer” (for other companies, the taxation of the general partner will be 19%);

– profit paid to the general partner is not subject to the obligation to pay social security contributions;

– the profit paid to the general partner is not subject to the obligation to pay the health insurance premium (it is a derivative of the lack of obligation to pay social security contributions);

– the profit paid to the general partner is not subject to taxation, the so-called solidarity levy (4%);

– the possible payment of the management fee to the general partner (resulting directly from the partnership agreement).

In order to take advantage of the deduction of income tax (CIT) paid by S.K.A. from the general partner’s tax (PIT), the profit of such a company should be paid within five years (counting from the end of the tax year following the year in which the company’s profit was achieved).

For further information about this topic, please contact Bernard.

Bernard Łukomski
Attorney-at-law
Tax advisor
Tel: 608 093 541