On January 18, 2022, the Director of the National Tax Inspectorate issued an individual interpretation with ref. no. 0111-KDWB.4010.51.2021.1.BB on determining whether the Applicant loses the right to taxation in the form of a lump sum from capital companies when the total revenues from operations in 2021 exceed PLN 100 million. Because the submitted application concerns a future event, the tax consequences of which relate to 2022, the interpretation considers the changes introduced in connection with the so-called Polish Governance Deal.
As of January 1, 2021, the Company chose to pay the Estonian CIT solution. The declaration of taxation in form was preceded by verification of fulfillment of conditions for taxation with a lump sum on the income of capital companies. The choice of taxation covers a period of immediately consecutive four tax years. However, setting a 4-year settlement period as a lump sum is not absolute because, in the event of a breach of its application’s conditions, the taxpayer also loses the right to a lump sum in these four years (Article 28l CIT).
One of the conditions is the loss of the right to tax at the end of the tax year in which the taxpayer did not meet the condition (Article 28j(1)(1) CIT). The total revenues from activities generated in the previous tax year did not exceed PLN 100 million. The value of average revenues from operations, calculated on the last day of the previous tax year from the lump sum tax period, did not exceed PLN 100 million. In the case of the Company, in 2021, income may exceed the amount of PLN 100 million of revenues from operations in 2021.
The doubts of the Applicant, whose total revenues from operations in 2021 will exceed PLN 100 million, concerned the established right to Estonian CIT solution. According to the Applicant, if the total revenues from operations in 2021 exceed PLN 100 million, he does not lose the right to tax according to the tax preference in question.
According to the tax authority, the taxpayer’s achievement in 2021 of the value of revenues, which violated the revenue condition (PLN 100 million), does not mean the obligation to stop continuing settlements in the Estonian CIT model. The taxpayer could continue the chosen form of taxation.
From January 1, 2022, the regulations in force repeal the income threshold and the provisions on adding the tax liability amounting to 5% of the tax base. If the condition of Article 28q of the CIT act has been repealed in its entirety and the legislator has not provided for transitional provisions requiring its application. In the tax authority’s opinion, there is no legal basis for applying for a tax liability supplement of 5% in 2022.
To sum up, a taxpayer taxed with a lump sum on the income of companies, who in 2021 exceeded the revenue limit set out in Article 28j(1)(1) of the CIT act, and who decided to continue taxation with a lump sum on the income of companies, will not be obliged to apply the tax liability supplement to the revenue obtained in 2022. In such a situation, the Company continues to settle by the provisions of Chapter 6b of CIT, considering the conditions introduced under the so-called Polish Governance. In the deal, the taxpayer will not be obliged to determine the additional amount of tax liability to the income earned in the next tax year.
Author: Marta Kiryczuk – Tax Consultant