Anti-Crisis Shield: Taxes and State Aid

The Polish Government is currently preparing a draft legislative package implementing the so-called economic and social anti-crisis shield for the safety of businesses and employees in connection with the SARS-CoV-2 virus pandemic.

Below, we publish a summary of the information disclosed so far, in relation to the planned tax and liquidity-supporting measures. As these proposed measures seem to be insufficient for many businesses, we predict that the government’s assistance package will evolve further, before it takes the form of final legislation.

Changes in Tax Rules

Significant contemplated tax changes include:

The right to retrospective loss settlement in Corporation Income Tax (the “CIT”) and Personal Income Tax (the “PIT”) for 2020

Businesses are to get the right to reduce the CIT tax base in 2019 by the amount of the loss incurred in 2020, provided that the loss is actually caused by the SARS-CoV-2 pandemic.

This condition is to be defined as the percentage difference between the taxpayer’s revenue for 2019 and 2020. However, this condition will not apply to taxpayers who are active in industries most affected by the SARS-CoV-2 pandemic, such as transport and tourism. In order to exercise this right, the taxpayer will have to correct its annual tax return for 2019.

Moreover, such right to preferential settlement of the loss will also be granted to natural persons, who are taxed by means of the PIT.

Tax Exemption for Funds Given to Businesses as State Aid

The following items will also be exempt from income tax:

amounts of ‘guarantee support’;
subsidy payments towards loans; and
subsidy payments towards the interest on loans,

granted under the Act in question and received in 2020 by the CIT and the PIT taxpayers, carrying out non-agricultural business activities.

Deferral of the Payments of the PIT Advances

The PIT taxpayers, who have suffered negative economic consequences due to the SARS-CoV-2 pandemic, will be able to benefit from a deferral. Advances on the PIT, collected in March and April 2020 on income from the employment relationship, as well as on income from rendering services (on the basis of the so called ‘contract for a mandate’ or a contract for specific work), will be allowed to be transferred by 1 June 2020.

Optional Exemption from Property Tax

Local authorities will be able, by way of a resolution, to introduce exemptions from property tax for a part of 2020 in relation to land, buildings and structures relevant for carrying out business activities by certain stipulated types of businesses, whose liquidity has been negatively impacted by the outbreak of the SARS-CoV-2 pandemic.

Furthermore, mayors or presidents of cities will be able, by decree, to extend the deadlines for payment of property tax instalments for those stipulated businesses, payable in April, May and June 2020, but until no longer than 30 September 2020.

Exemption from the tax on civil law acts (‘the PCC Law’) of Loan Agreements Concluded by Affected Businesses

Loan agreements signed by 31 August 2020 by businesses whose liquidity has been negatively affected by the outbreak of the SARS-CoV-2 virus pandemic are to be exempt from civil law transaction tax.

Exclusion of Loans granted by Banks to Pandemic-affected Businesses from the Tax Base for Certain Financial Institutions

Banks will not be obliged to include into the tax base for certain financial institutions the value of assets stemming from the loan agreements granted to businesses affected by the SARS-CoV-2 pandemic, signed from the entry into force of the new governmental support measures until 31 August 2020.

Postponing the Obligation to Submit a New JPK_VAT

The obligation to submit the JPK_VAT in its new form (including, among other things, the VAT-7 declaration) for large businesses will be postponed until 1 July 2020. We note that this obligation was meant to come into force from 1 April 2020, but due to the SARS-CoV-2 pandemic, the rollout date will be postponed.

Preferential Deduction of Donations for SARS-CoV-2 Pandemic Prevention from the PIT and the CIT Tax Revenue

Both PIT and CIT taxpayers who made donations in 2020 to counteract the SARS-CoV-2 pandemic will be able to deduct the entire amount of these donations from their taxable income. The deduction is subject to the condition that the donations are made to the entities listed in the act (please note that, as a rule, the following limits apply to deductions of donations from tax income: 6% and 10% of income respectively).

No ‘Prolonging Fee’ for Deferral of Tax Payment or Spread of Tax Payment into Instalments

The Polish tax authority will not set a prolonging fee on the amount of the tax or tax arrears when issuing decisions regarding:

tax deferrals;
payment of the tax due in instalments; and
deferring of or setting out instalments for the payment of tax arrears, together with interest on arrears or interest on outstanding tax advances.

The conditions are (i) that the decision concerns a tax constituting State budget revenue; and (ii) the application will be submitted by the taxpayer after the new governmental measures enter into force.

Extension of the Deadline for Issuing of an Individual Interpretation

In the case of applications for individual interpretations submitted and not considered by the date of entry into force of the governmental measures in question, the three-month deadline is to be extended by one month. In addition, the Ministry of Finance, by way of decree, will be able to extend this deadline by further periods, but not more than three months.

Elements of the Anti-Crisis Measures in Respect of Liquidity (State Aid)

At this state, more detailed information has been published on the following liquidity-related features of the Polish government’s anti-crisis measures (representing potential state aid):

Loan guarantees

Bank Gospodarstwa Krajowego is to give guarantees under the de minimis aid formula. The guarantee will cover up to 80% of the loan value, but not more than PLN 3.5 million.

Loans to Micro-businesses

Micro-businesses (up to 9 employees) are to obtain low-interest loans from the Employment Fund up to the amount of PLN 5,000, for a period of 12 months, provided there is no reduction in employee headcount.

Refinancing of Leasing from the IDA

Transport firms will be able to refinance leases with commercial leasing companies with a grace period of up to 12 months. The amount of leasing refinancing is to be set up to PLN 5 million net, for the period of up to six years.

Loans to Finance Deficit in Working Capital from ARP

Under these loans, it will be possible to obtain an amount from PLN 0.8 to 5 million; financing period up to six years; and with a grace period of up to 15 months.

Loans to Finance SME Remuneration from IDA

Loans for this purpose will be available for up to two years, with salaries paid directly to employees, and a grace period of up to 12 months.

We will keep you informed as and when further details are published. It is worth noting that yesterday the European Commission urgently adopted a package of regulations relaxing the EU state aid laws, in connection with the pandemic. In the next alert, we will try to further explain the conditions for the use of the Polish government’s emergency aid; their relation with the state aid rules used so far; and the applicable limits.

Should you have any further questions regarding the changes in the tax law or state aid rules, resulting from the Polish government’s reaction to the SARS-CoV-2 pandemic, please let us know.

We can assist you in taking advantage of the contemplated reliefs, tax breaks and other forms of state assistance to support your business, in the face of the economic recession caused by COVID-19.