Project changes in a lump sum. The ministry wants to increase rates

What changes in the lump sum payment for entrepreneurs are included in the draft amendment?

The draft amendment (list no. UD116) provides for three fundamental changes regarding the lump sum paid by entrepreneurs.

Higher tax at a rate of 17%. are to be paid by entrepreneurs who also run a JDG and are partners in a company for which, for example, they lease various types of intellectual property, e.g. a trademark, but also patents, utility models, know-how and other rights.

Currently, as explained by the Ministry of Finance, entrepreneurs often use the optimization mechanism. A shareholder of a limited liability company who owns a trademark (the “name” under which the company operates) leases it to this company. Both parties benefit from this tax-wise:

— the company includes lease costs as tax-deductible costs, thereby reducing its CIT tax base,

— the partner taxes the income from such lease at a lump sum of 8.5%. (12.5% ​​on the surplus of over PLN 100,000 of income).

However, if the partners did not optimize, the company's benefits would be paid as dividends, subject to 19% income tax. The company would also have no benefits in the form of tax deductible costs. In other words, the Ministry wants to deprive both parties – the company and the partner – of the benefits.

The project provides that revenues are earned from a rental or lease agreement or a similar agreement intellectual property and similar products excluding works protected by copyright, if they are concluded with a related entity, will be taxed at a rate of 17%.

How will the lease be taxed, among others? real estate?

The Ministry of Finance indicates that a similar optimization mechanism applies to leases (private and as part of a business activity) to related entities. For example, this is a situation where a partner of a company rents its property. Both parties also benefit here – the company has a tax expense (pays for the lease), and the partner pays a lump sum on the rental income at a rate of 8.5%. and 12.5 percent (from the surplus over PLN 100,000).

The project assumes an increase in the second rate from 12.5%. up to 15 percent So in the case of rental income (private and business) provided to related entities, from a surplus of over PLN 100,000 zloty the rate will be 15 percent.

After the changes, the rate is 8.5%. will apply to rental income up to PLN 100,000. PLN, regardless of whether these revenues will be obtained from a related entity or not. However, the surplus of revenues above PLN 100,000 PLN will be taxed at a rate of 12.5%. (when the lease is to an entity unrelated to the taxpayer) or a rate of 15%. (in the case of revenues obtained from a related entity).

How will entrepreneurs tax services when they do not employ taxpayers?

The ministry also wants to increase the tax on taxpayers who provide services and earn revenues exceeding PLN 100,000. PLN and do not employ any employees.

The project shows that revenues exceeding 100 thousand PLN obtained by an entrepreneur who provides services currently taxed at a rate of 8.5%. (listed in Article 12(1)(5) of the Flat-rate Income Tax Act) will be subject to a 15% tax if the taxpayer does not employ any employees.

This means that an entrepreneur who does not employ employees and provides services listed in Art. 12 section 1 point 5 of the Act (taxed at a rate of 8.5%):

— up to 100 thousand PLN of income will continue to pay tax at this low rate of 8.5%,

— from a surplus of over PLN 100,000 PLN at a rate of 15%.

However, an entrepreneur who employs at least one employee under an employment contract will be able to tax all revenues from services at a rate of 8.5%.

The employment of an employee should last the entire year, and in the case of starting a business during the year – from the moment of starting the business, which is taxed at a lump sum. If, during the period of lump sum taxation on recorded income, employment ceases during the year, the taxpayer will have to pay a lump sum at a rate of 15%. from the surplus of revenues achieved from the beginning of the year (from the start of operations).

“The changes are redundant and will complicate the lump sum system”

Grzegorz Grochowina believes that the project complicates the lump sum system.

— The problem is that the lump-sum regulations are already unclear and based on outdated PKWiU classifications, which causes numerous disputes – for example, in the IT industry it is difficult to clearly determine which services are subject to the 8.5% rate and which 12%. – says the expert.

What's more, in his opinion the new employment requirement, which determines the lower rate, may particularly hit small companies – for some of them, a higher tax means a decrease in the profitability of their business. — In turn, larger entities may be willing to artificially employ employees just to avoid higher rates, says Grzegorz Grochowina.

Also planned changes regarding lease and intellectual property rights (e.g. lease of trademarks) are intended to prevent the transfer of income to lower taxed forms, but at the same time may generate further interpretation doubts and encourage people to look for new ways to circumvent the regulations.

— As a result, instead of simplification and greater transparency, entrepreneurs may receive an even more complicated system and a greater risk of disputes with the tax office – says our interlocutor.

Various organizations also submitted similar comments on the project during consultations.

“A taxpayer providing genuine, market-based services to a related entity will be charged a higher lump sum rate only because of the ownership structure and not because of any abuse. This regulation penalizes normal economic relations and does not differentiate between taxpayers optimizing and those conducting business based on well-established, correct business models,” says the National Council of Tax Advisors.

KRDP also emphasizes that “threshold of 100 thousand PLN of revenue is low and in the case of many services (e.g. accounting services, advisory services, real estate rental) will be exceeded already in the first months of the tax year. Regulation will affect therefore, not so much a narrow group of taxpayers using aggressive optimization schemes, but “wide range of entrepreneurs maintaining normal economic relations with related entities” — says KRDP.

According to KRDP, the rate will increase to 17%. “is excessively broad in scope. It includes not only trademarks, but all intellectual property made available to an affiliated entity – including patents, utility models, know-how and other rights.

The Council explains that these rights are often invested in the entrepreneur's personal assets not for tax purposes, but to protect these assets against economic risks related to the company's activities, to meet licensing requirements or to implement a succession strategy. “Automatic imposition of a rate of 17%. any paid use of these rights by related entities, without examining the marketability of the transaction conditions or the taxpayer's motivation, is disproportionate and violates established, correct business models,” we read.

Rate increase to 17%. I don't particularly like it either Association of Accountants in Poland.

“This approach raises doubtsbecause actual services will also be taxed at 17%. only because they are provided between related entities. In practice, this will lead to a situation in which two entrepreneurs providing the same type of services will pay different tax just because one of them provides them to a related entity. This change raises doubts from the point of view of fairness of taxation. Instead of actually tightening the system, it may lead to its further complication and the emergence of new interpretation disputes. – we read in the position of SKwP.

The Association admits that changes in the lease also lead to this “all services provided between related entities are treated in a uniform manner, regardless of their actual nature. This approach raises doubtsbecause real services are also taxed at 17%. only because they are provided between related entities.

“Therefore, it is justified to re-examine the planned changes, which in their current form may be too radical and also cover actual activities.” – states SKwP.

Author: Łukasz Zalewski, journalist of the Law section, Business Insider Polska