IC&Partners Poland S.A. - Newsletter December 2021

Health contribution for members of the board of directors

Starting from January 1, 2022, the mandatory health contribution of 9% will be applied to the remuneration received by the member of the board of directors, paid on the basis of a resolution of the shareholders. The company that pays the compensation will have to register this administrator in the insurance system and pay the contributions in the name of the taxpayer. The contribution will not be deductible from income tax. It is worth noting that board members who do not receive remuneration for their functions will not be subject to mandatory health insurance. However, the contribution will also be paid by members of the boards of directors of foreign companies, provided that a given person is subject to Polish social insurance legislation. Persons who perform the functions of board members in Polish companies, but who at the same time are subject to the social insurance system in one of the EU / EEA countries or in another country with which Poland, or who have concluded a social insurance agreement (for example the United States, Canada or Australia), they will not be obliged to pay the contributions. Such a board member will need to demonstrate that they are subject to the overseas social insurance system by submitting a valid A1 form issued by a foreign insurance institution.

 

Logical structure of the electronic invoice

The Ministry of Finance announced that the logical structure of the electronic invoice (FA_VAT) has been published on the ePUAP platform. The published model takes into account the comments made during the tests of the facility. Polish entrepreneurs will be able to voluntarily use electronic invoicing from 1 January 2022 as one of the forms of sales documentation - alongside paper invoices and digital invoices. The ministry plans to make electronic invoicing mandatory for entrepreneurs in 2023.

 

Car leasing vs long-term rental in 2022

The new Polski Ład legislation changes the rules on the use of company cars. It is now common practice for entrepreneurs to lease a vehicle for several years, make a so-called redemption from a natural person at the end of the lease term and then sell the car tax-free after a minimum of 6 months. These favorable and affordable arrangements have made leasing a more popular form of car financing than long-term rental. With the introduction of new rules, mainly the taxation of car sales, long-term rental will become much cheaper. According to some analyzes, leasing will be about 20% more expensive than renting.

 

Changes in the application of the Estonian CIT

From 2022, more taxpayers will be able to use the “Estonian CIT” tax regime. The companies that will be entitled to this form of taxation will also be limited partnerships and limited partnerships by shares and simple partnerships. In addition, the annual revenue cap has been removed. Until the end of 2021 it will be PLN 100 million per year and the condition that obliges taxpayers to keep investment or salary expenses at a certain level has been abolished..

However, it should be remembered that still to join the Estonian system:

 

• the partners / shareholders must be only natural persons, and the company itself cannot be a partner of other companies,

• less than 50 percent of revenue is passive income (e.g. interest, royalties, guarantees),

• the requirements relating to the number of employees must be met (as a rule, at least 3 persons on a working or contractual basis).

 

New limit on B2B and B2C cash transactions

Since 2022, the government has introduced a reduction in the limit for B2B payments in cash from PLN 15k to PLN 8k. In addition, a cash payment limit has been introduced for individuals, which is 20 thousand. It is therefore important to remember that from January 1, 2021, if the entire payment in a business-to-business transaction worth more than PLN 8,000 is made in cash, that expense is no longer deductible; however, cash payment for a transaction up to PLN 8,000 constitutes a deductible cost. A consumer, on the other hand, is obliged to make payments through a bank account if the total value of the transaction with the entrepreneur (regardless of the number of payments resulting from the transaction) exceeds PLN 20,000 or the equivalent of this amount (transactions in foreign currencies are converted into PLN at the average exchange rate of foreign currencies published by the National Bank of Poland on the last business day preceding the day of the transaction).

 

Tax advantages for Dutch BV (Besloten Vennootschap) companies

The Netherlands has invested in creating a business-friendly environment in recent years in order to attract foreign companies. There are many reasons why foreign companies are interested in the Netherlands, starting with the tax advantages that the country offers. Here are the main benefits that the Netherlands offers for a company, or foreign investor, in founding a Dutch BV:  

1. Dutch law provides for lower withholding tax on interest, dividends and royalties paid to Dutch companies and mostly excludes capital gains tax from the sale of shares in the countries of origin (deal with approximately 100 jurisdictions).

2. The Netherlands has one of the largest investment treaty networks in the world. A Dutch BV provides access to this network of around 100 jurisdictions. This network usually protects against expropriation and protects investors in such a way that they receive the same treatment that domestic investors or third-country investors would receive. Using a Dutch company in the corporate structure could safeguard against foreign government intervention by incorporating dispute resolution clauses that allow for international arbitration, in favor of using the domestic judicial system.

3. Access to European directives for the reduction of withholding tax on payments between companies.

4. Total exemption from taxation for the income of foreign subsidiaries. The participation exemption scheme does not allow for taxation in the Netherlands of eligible dividends and capital gains if a Dutch holding company holds at least a 5% interest and meets at least one of the following rules:

A) Less than 50% of the subsidiary's consolidated assets consisted of free passive low-tax investments.

B) The objective for investing in the subsidiary is to obtain a return higher than that which can be expected from normal asset management.

5. The subsidiary is subject to a realistic tax rate according to Dutch standards of approximately 10%. In addition, Dutch law provides for exemption from taxation for income from foreign permanent establishments of Dutch entities and for the efficient tax repatriation of profits.

6. Innovation subsidies, taxing profits from eligible intangible assets at an effective rate of 5%.

7. Financing (including hybrid debt) and intellectual property agreements with no withholding tax on interest, services and royalty payments even if paid to “tax havens”.

8. Facilitating business creation within the EU for Dutch companies.

9. Deferred taxation for corporate reorganizations.

10. Possibility of forming a tax unit (subject to certain conditions for companies directly controlled by Dutch companies) which allows it to be taxed as a single taxpayer.

11. Possibility of deferring the taxation of capital gains realized on the sale or conversion of corporate real estate, tangible or intangible, which are not held as a passive investment.

If you are interested in having more details on the incorporation of a BV company, its characteristics and tax advantages, please contact IC&Partners Poland S.A..