Tax on shifted profits. 2024 deadline approaching
Shifted profits in Poland - the catalogue of costs
The catalogue of costs representing shifted profits includes the following:
- Advisory services, market research, advertising services, management and control, data processing, insurance, guarantees and warranties and services of a similar nature;
- All kinds of fees and charges for exercising a right or the right to use intellectual property rights (so-called royalties);
- Transfer of the risk of insolvency of a debtor;
- debt financing related to obtaining and using the funds (including interest, fees, commissions, premiums, the interest portion of the lease instalment, fines and late payment charges);
- Fees and remuneration for the transfer of functions, assets, or risks (so-called exit fees)
if their total amount incurred during the tax year for related parties is at least 3% of the total of deductible expenses incurred in that year in any form.
To assess if the given entity is liable to pay this tax very specific factors and circumstances of these payments on the side of the recipient must be examined. This includes the recipient’s tax status and applicable tax regime, further distribution of the fees received, the ratio of these fees in the overall income of the recipient in a given tax year.
Important! According to the amendment to the legislation, which came into force in 2023, the rules regarding the burden of proof for the tax on shifted income have changed. For the 2024 tax return, the responsibility is on the taxpayer to show that the expense in question does not meet the definition of ‘shifted income'.
The provisions on the tax on shifted profits do not apply if the above-mentioned costs were incurred for the benefit of a related party subject to taxation in respect of all its income in an EU or European Economic Area country, with the proviso that the entity concerned has to carry out substantial real economic activity in that country.
Shifted profits 2024 – what is the deadline?
The tax on shifted profits shall be calculated for the tax year and reported in the annual tax return filed for 2024. It should be paid within the deadline for submitting the annual tax return.
Tax on the shifted profits shall be accounted for in the CIT-8 return for 2024.
In case of taxpayers whose tax year ended on December 31st, 2024, this deadline elapses on March 31st, 2025.
Tax on shifted profits – how can we help?
Once again determining whether the expenses incurred for the services listed above will indeed qualify for tax on shifted profits is going to be a tremendous challenge for taxpayers.
We will help you:
- Analyse the costs which may meet the definition of "shifted profits",
- Verify the ratio of such expenses to total tax costs in a given year,
- Analyse the conditions at the level of the recipient of the dues, together with an analysis of the source documentation,
- Analyse the status of the receiver of the dues as conducting a substantial real economic activity in the country of its residency (EU/EEA).
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