Tax on so-called “shifted profits”

What’s going to change?

Tax on so-called shifted profits may be a new, challenging item on the “tax burden” agenda that can be levied on a Polish company making intra-group settlements. 

The in-scope payments can potentially cover costs incurred for:  

• i.a. intangible services, interest, royalties  
• if incurred directly or indirectly to a related parties 
• provided that the sum of such costs incurred in a given tax year for both related and non-related parties is higher that 3% of costs incurred by the taxpayer in general (including depreciation write-offs) 

Moreover new provisions require certain additional conditions to be met. These concern i.a. tax amount paid by the payments’ recipient in its jurisdiction and structure of payments’ flow (e.g. if payments are subsequently distributed as dividend or dividend like payment)  

What does it mean?

If given stream of payment is considered “shifted profit”, Polish company may be obliged to pay 19% CIT on its value (certain deductions are possible e.g. paid WHT)  

Exclusion concerns however a payment recipient being tax resident in EU / EEA jurisdiction, provided that he conducts in its resident country significant genuine business activity.   

In practice new provisions may be in particular burdensome for companies from Switzerland, UK or USA (and other non-EU/EEA countries). At the same time vague wording, of the provisions will require case by case analysis to properly asses the final impact.