Topic: Tax

Royal Decree-Law 7/2020, of 12 March, adopting urgent measures to mitigate the economic impact of COVID-19 (“RDL 7/2020”) includes the granting of deferrals for some tax debts, provided the following conditions are met:

(1) They must be debts with a total or partial guarantee waiver (i.e., amounting to less than 30,000 euros). The regulation sets this amount by referring to the Order on guarantee waivers. As a result, it is not clear if the latter is fully applicable or not (i.e., if said amount must be the aggregated sum of all deferred periods and taxes or if it refers to each individual tax and period).

(2) The measure touches on the withholding and prepayment of Personal Income Tax (“IRPF”), Value Added Tax (“IVA”) and on fractioned Corporate Tax (“IS”) payments (whose deferral and fractioning were, up until now, not generally allowed).

Only covers returns/liquidations that must be submitted and paid between 13 March and 30 May 2020. The following will be included:

• Personal Income Tax/VAT: corresponding to February, March, and April, as well as those of the first quarter.
  
  (1) Corporate Tax: first fractioned payment and final statement (in certain split years).
  
  (2) This measure is only available to taxpayers who registered a turnover of less than 6,010,121.04 euros in 2019.

• Deferrals will be granted for a six-month period and no interests for late payment will be accrued for the first three months.

In this context, we believe the following scenarios are possible:

A. The taxpayer is able to meet his/her tax obligations:

This is the ideal scenario, so there is no need to analyze it further.

B. The taxpayer does not have the means to meet his/her tax obligations but meets the requirements set forth in RDL 7/2020:

If the taxpayer meets the aforementioned requirements, he/she can ask for a deferral according to the terms and conditions mentioned above.

C. The taxpayer does not have the means to meet his/her tax obligations and does not meet the requirements set forth in RDL 7/2020:

In principle, the requirements set forth by RDL 7/2020 are clear. However, we believe taxpayers whose debt exceeds 30,000 euros and/or whose 2019 turnover exceeds the amount stated may also push for this sort of deferral.

We believe the granting of deferrals should include taxpayers who had a turnover of more than 6,010,121.04 euros in 2019, so as to avoid discriminatory stances that go against the very principles that govern our tax system. Following a similar line of reasoning, one might also call for the deferral of sums over 30,000 euros in certain cases.

We believe we could also fight the imposition of penalties, as well as of surcharges, for defaults caused by force majeure events.

It is worth noting that the following months will bring plenty of new scenarios. As a result, it is crucial to study matters on a case-by-case basis so as to plan the best possible strategy.

Other measures

Electronic certificates expiring soon

In its website, the Spanish Tax Agency has published a warning that reads as follows:

“The Spanish Tax Agency informs taxpayers whose electronic certificate is about to expire, or has already done so, that it will allow the use of said certificates in its site in accordance with the provisions set forth in Royal Decree 463/2020, of 14 March.

If you encounter problems with your regular browser, we suggest switching to Firefox (where you can carry on using it).”

Cadaster formalities

The time limit to reply to information requests and orders submitted by the General Directorate of Cadaster will be extended to 30 April 2020, provided this time limit had not already expired when Royal Decree-Law 8/2020, of 17 March, on extraordinary urgent measures to face the economic and social impact of COVID-19 (“RDL 8/2020”) entered into force (18 March 2020).

The periods to take appropriate measures regarding the launch of allegation procedures or hearings notified by the General Directorate of Cadaster from 18 March 2020 will be extended to 20 May 2020 (unless the general rule sets a longer period, in which case the latter shall apply).

If the taxpayer complies with the court order, supplies the information with tax significance requested or submits his/her allegations, the proceedings will be deemed fulfilled.

The period ranging from 18 March to 30 April 2020 will not be taken into account when setting the maximum duration for procedures launched by the authorities. However, during this period, the Administration can order, prescribe, or carry out essential formalities.

Exemptions from the Property Transfer and Certified Legal Documents Tax for certain mortgage operations

The first final provision of RDL 8/2020 modifies Royal Legislative Decree 1/1993, of 24 September, approving the consolidated text of the Law on Property Transfer and Certified Legal Documents Tax.

This way, a new number is introduced under article 45.I.B) to declare notarial documents and formalization deeds on credit contract novations and mortgages concluded under RDL 8/2020 are exempt from the gradual fee to be paid for Certified Legal Documents.

Customs formalities

Import customs formalities for the industrial sector shall be streamlined. To do so, the Customs and Excise Department of the Spanish Tax Agency can authorize the customs declaration and clearance procedure to be carried out using the computer applications available, without any amendments on the part of bodies or officials working for the Customs and Excise Department.

Since the publication of Royal Decree 463/2020, of 14 March, declaring the state of alarm to manage the health crisis caused by COVID-19 (“RD 463/2020″), these past few days have been marked by a debate regarding the interpretation of its third additional provision, by which “the terms and deadlines to process procedures by public sector entities are suspended or interrupted”.

The debate focused on the scope of this suspension (i.e., if its effects were applicable to deadlines linked to fiscal obligations, such as the filing of tax returns or the payment of debts settled by the Tax Authorities).

The matter has already been resolved by Royal Decree 465/2020, of 17 March, modifying Royal Decree 463/2020, of 14 March, declaring the state of alarm to manage the health crisis caused by COVID-19 (“RD 465/2020″), which adds the following new content to the aforementioned third additional provision:

“6. The suspension of the terms and the interruption of the administrative deadlines mentioned in paragraph 1 will not be applicable to tax periods, which are subject to special regulations, and shall not alter the deadlines set for the submittal of tax returns and self-assessments.”

As a result, it is obvious that the suspension or cancellation of deadlines brought by the state of alarm (RD 463/2020) is not applicable to the periods established for the submittal of tax returns and self-assessments (despite parties having the right to request their postponement, as detailed further on).

Notwithstanding the Royal Decree-Law 8/2020, of 17 March, on extraordinary urgent measures to face the economic and social impact of COVID-19 (“ RDL 8/2020″) does include a whole section on the suspension and/or extension of tax-related deadlines, which we shall analyze below.

Suspension and extension of fiscal-related deadlines

First of all, it is worth noting that RDL 8/2020 entered into force on 18 March 2020 for a period of one month.

Article 33 RDL 8/2020 regulates some events links to the suspension or extension of tax-related deadlines and renders them more flexible, as summarized below:

A. The following terms are extended until 30 April 2020, provided they had launched before RDL 8/2020 entered into force (18 March 2020) and had not expired by then:

• The terms for tax collection related to liquidations (ii) during the voluntary period, and (ii) during the enforcement period, once orders for recovery were sent.

• The expiry of full and partial terms on deferment and fractioning agreements already concluded.

• Terms related to auctions and foreclosure of assets.

• The periods to comply with court orders, enforcement proceedings or requests for information with tax significance, to lodge pledgings in any actions or proceedings for the enforcement of tax-related matters, sanctions, nullity statements, the return of sums unduly paid, and to correct revocation and material errors.

• When it comes to orders for recovery, between 18 March and 30 April 2020 no collateral enforcements involving property will be carried out.

B. The following terms are extended until 20 May 2020, provided they are notified at a later date than that in which RDL 8/2020 entered into force (and unless the deadlines that appear in the regulations are broader, in which case the latter shall apply):

• The terms for tax collection related to liquidations (ii) during the voluntary period, and (ii) during the enforcement period, once orders for recovery were sent.

• The expiry of full and partial terms on deferment and fractioning agreements already concluded.

• Terms related to auctions and foreclosure of assets.

• The periods to comply with court orders, enforcement proceedings, information requests or opening acts involving allegations or hearing procedures.

C. In addition, article 33 also contains the following provisions that are worth mentioning:

• The taxpayer can meet the abovementioned obligations (i.e. court orders, requests for information with tax significance, allegations) within the initial deadline set, in which case these formalities will be deemed performed.

• The special terms and deadlines under custom regulations to lodge pleadings and comply with court orders remain untouched.

• With the sole intent of calculating the prescription periods in appeals for reversal and economic-administrative proceedings, final resolutions will be deemed notified when an attempt to deliver them between 18 March and 30 April is duly accredited.
  
  The period to lodge appeals or claims of an economic-administrative nature involving taxes, as well as to appeal (through administrative channels) the decisions adopted in economic-administrative proceedings, will not start until the abovementioned term is over (or until the relevant notification is sent, provided this is of a later date).

• In accordance with the criteria followed by the Spanish Tax Agency, if the act or resolution was notified before RD 463/2020 entered into force (14 March 2020), and the deadline to lodge an appeal or claim was not over on that date, the period to lodge an economic-administrative claim or appeal will be one month from 1 May 2020 (or from the day following the end of the state of alarm, whichever is later).

Potential tax loss carryback – PIT and CIT (applies to losses incurred in 2020)
Taxpayers that:
(i) suffered a loss in 2020; and
(ii) generated revenues which are at least 50% lower than in 2019 (with respect to the same operations)
due to COVID-19, can apply the loss recorded in 2020 to their CIT-8 return for 2019, yet no more than PLN 5m.

Tax on revenue from buildings deferred until July 20, 2020
The payment date for tax on revenue from buildings for the period of March-May 2020 has been extended until July 20, 2020 for taxpayers:
(i) that have suffered negative economic consequences due to COVID-19 in a given month; and
(ii) whose revenue in a given month is at least 50% lower than in the corresponding month of 2019.

Deferral of PIT advances until June 01, 2020
The deadline to pay PIT advances for March and April 2020 on revenue from employment agreements, civil-law agreements , proprietary rights (if the 50% rate of tax-deductible expenses applies) and social benefits from ZUS [Social Insurance Institution] is extended until June 01, 2020 if taxpayers have suffered negative economic consequences due to COVID-19.

Exemption from tax on civil-law transactions on loans
The tax on civil-law transactions will not apply to loan agreements executed until August 31, 2020, yet only with respect to business entities whose liquidity has deteriorated as a result of the negative economic consequences related to COVID-19.

Waiver of the debtors’ obligation to apply bad debt relief in case of non-payment
The debtor is not obliged to increase the income that serves as the basis for calculation of CIT advances in 2020 by the value of unpaid obligations; this applies to debtors that:
(i) that have suffered negative economic consequences due to COVID-19 in a given period; and
(ii) whose revenue in a given month is at least 50% lower than in the corresponding month of 2019.

Possibility to drop simplified income tax advances for March-December 2020
(i) The so-called “small taxpayers” that are using simplified income tax advances in 2020 can now decide to opt out of this solution in March-December 2020 if they are bearing negative economic implications related to COVID-19.
(ii) The taxpayer should notify the tax authority accordingly in the 2020 annual return.

Deduction of donations made for COVID-19 prevention purposes
This applies to donations (cash or in-kind) aimed at prevention and combating of COVID-19, made in 2020 to:
(i) entities performing medical operations, listed in the register indicated in the COVID-19 Act;
(ii) the Material Reserves Agency for purposes related to its statutory objectives;
(iii) the Central Base of Sanitary and Anti-Epidemic Reserves for purposes related to its statutory objectives.

Deferred effective dates
Retail sales tax: January 01, 2021;
New VAT rate matrix: July 01, 2020;
SAF-T VAT for large enterprises: July 01, 2020.

No extension fee in case of tax and ZUS reliefs
(i) Waiver of the extension fee in case of a decision granting a tax exemption (on the basis of an application filed during the state of epidemic threat or the state of epidemic, or within 30 days after its revocation).
(ii) Waiver of the extension fee in case of payment in instalments or deferral of social insurance contributions for the period starting from January 01, 2020 (on the basis of an application filed during the state of epidemic threat or the state of epidemic, or within 30 days after its revocation).

Tax audits and enforcement procedures
Possibility to suspend tax audits, tax procedures and customs/tax inspections ex officio or at the taxpayer’s request. The decision takes effect as of its issue date. The authority shall deliver the decision promptly, yet no later than on the delivery date of a decision resuming the suspended audit/procedure. The periods of suspension are not taken into account for purposes related to the terms/dates of audits/procedures.

Reporting obligations – postponed deadlines
(i) Extension of the deadline to submit a notice of payment to a bank account from outside the so-called white-list to 14 days of the transfer date during the state of epidemic threat / state of epidemic, announced as a result of COVID-19.
(ii) Suspension of deadlines for mandatory disclosure reports (other than related to cross-border arrangements) between March 31 and June 30, 2020.
(iii) Extension of the term for the issue of advance tax rulings to 6 months.

Authorities’ right to offer further reliefs and solutions
(i) City/town councils can decide to pass resolutions based on which lands, buildings and structures related to business operations will be exempt from the property tax; this applies to business entities whose liquidity has deteriorated as a result of the negative economic consequences related to COVID-19.
(ii) The mayor of a city/town or head of a municipality can adopt a regulation extending the payment dates for instalments of the property tax due for April-June 2020 until September 30, 2020 at the latest; this applies to a specific group of business entities whose liquidity has deteriorated as a result of the negative economic consequences related to COVID-19.
(iii) The Ministry of Finance can issue a regulation postponing the dates for preparation, approval, publication and delivery of financial statements.

Please feel free to contact us for any assistance.

Want to support Poland in fighting the pandemic?

Planning to donate goods or services to hospitals? Wish to provide machines, equipment or premises?

Worried that your good intentions will backfire, and you’ll end up in a maze of taxes and paperwork?

We want to help, as well.

Our tax and legal team will assist you for free. We are ready to recommend the best tax options and prepare relevant documents.

Please get in touch and share.

Michał Wielhorski
Managing Partner
+48 605 911 303
michal.wielhorski@actlegal-bsww.com

Małgorzata Wąsowska
Partner | Head of Tax
+48 691 477 047
malgorzata.wasowska@actlegal-bsww.com

Based on its announcement of March 19, 2020, the Ministry of Finance is suggesting the following types of anti-crisis solutions related to taxes.

– Potential tax loss carryback (PIT and CIT)
The loss recorded in 2020 can be applied to the previous profitable year (2019). For that purpose, it will be necessary to submit an amended tax return for 2019. This can be done by taxpayers whose revenue generated in 2020 drops by at least 50% against the 2019 figure. It will be possible to deduct a loss of up to PLN 5m from the 2019 income (any surplus over that amount might be applied to subsequent years).

– Extension of the deadline for payment of the minimum tax on commercial real estate for March-May 2020 until July 20, 2020.
This option can be used by taxpayers whose revenue in a given month, compared to the corresponding month of the previous fiscal year, drops by at least 50%. This tax can also be paid at a later date by taxpayers that did not generate revenues in the previous fiscal year but are bearing the negative implications of coronavirus in March-May 2020.

– Preclusion of the application of the so-called bad debt regulations with respect to debtors that should take unpaid obligations into account when calculating income tax advances.
This exemption will apply to taxpayers whose revenues generated in specific billing cycles (monthly or quarterly) decreased by at least 50% against corresponding periods in 2019. This option can also be used by taxpayers that did not generate revenues in the previous fiscal year but are bearing the negative implications of coronavirus in 2020.

– Possibility to drop simplified income tax advances; calculating monthly advances on the basis of current profits, instead.
The so-called “small taxpayers” will be entitled to drop simplified income tax advances. Those who decide to opt out of simplified advances in March-December 2020 will be calculating their monthly advance payments on the basis of the current income.

– Extended deadline for CIT-8 filing for NGOs.

– Newly-introduced deduction of donations (cash or in-kind) from PIT and CIT – this applies to donations aimed at prevention and combating of the coronavirus epidemic, given to entities that offer healthcare services, incl. sanitary transport, as well the Material Reserves Agency and the Central Base of Sanitary and Anti-Epidemic Reserves.

– Extension of the deadline for advance payroll tax payments for March and April.
The plan is to extend the deadline until June 01, 2020.

– Temporary waiver of the extension fee for payment in instalments or deferral of tax and tax arrears.

– Deferred obligation to submit new SAF-T_VAT for large enterprises – until July 01, 2020.

– Deferral of submissions with the Central Register of Beneficial Owners – until July 01, 2020.

– Possibility to introduce property tax exemptions at the municipal level for enterprises suffering from the negative impact of the coronavirus epidemic.

– Increased flexibility of the National Revenue Administration with respect to performance of its tasks in the time of crisis. Possibility to suspend tax audits, tax procedures and customs/tax inspections while the state of epidemic threat is in effect.

– More flexible financial management rules for entities operating in the public finance sector, incl. local authorities, special-purpose funds, executive agencies and the national budget, in order to offer the quickest and most efficient way to use public funds for purposes related to COVID-19 prevention.

– Possibility to suspend administrative enforcement procedures related to financial obligations.

Please feel free to contact us for any assistance.

On March 18, 2020, during a conference held after the Cabinet Council meeting, the President and Prime Minister of Poland announced that works are underway on a range of draft bills as part of the so-called “anti-crisis shield.” They are supposed to form an aid package aimed at prevention of the negative impact of the coronavirus epidemic. The anti-crisis shield is going to be based on 5 pillars: employee protection, financial liquidity, healthcare support, security of deposits and public investments. These actions may include deferral of ZUS contributions, support for individuals hired on the basis of civil-law contracts, and payment holidays. You can find more information in our general alert – Anti-crisis package. Unfortunately, there are no specific details of the anticipated reliefs and exemptions related to tax settlements. Additionally, the Chancellery of the Prime Minister has indicated that it intends to postpone the deadlines for submission of PIT-36, PIT-36L, PIT-38 and PIT-39 until the end of June 2020. Also, local authorities (e.g. the Mayor of Kraków) are declaring their plans to support businesses with a property tax relief if the COVID-19 threat affects financial liquidity.

ZUS [Social Insurance Institution] website provides information about the application of reliefs in relation to coronavirus, based on which businesses will be able to use the following simplified types of assistance:
• deferral of the payment term by 3 months for the period of February – April 2020;
• 3-month suspension of performance of an agreement executed with ZUS, in which the payment dates for instalments or contributions fall between March and May 2020, and, consequently, 3-month extension of the agreement term.

In an application, it is necessary to specify how the coronavirus epidemic has influenced the business entity’s financial condition. Needless to say, the fact that an application is submitted does not automatically mean that it will be approved.

We are still waiting for the draft special-purpose tax act. Plans for its adoption were announced by the Ministry of Development. It is supposed to include a range of relief measures for taxpayers, such as postponement of the effective date of the “new” SAF-T VAT, quicker VAT refunds and easier application of the split payment mechanism (as discussed in further detail in our tax alert of March 13, 2020).

Payment reliefs

In its official announcement, the Ministry of Finance declared that “in case of negative financial consequences for businesses, arising from the coronavirus epidemic, tax offices will take these unusual circumstances into account while processing applications for relief in payment of tax obligations (payment term deferral, payment in instalments, cancellation of tax debt, etc.).” Taxpayers’ applications related to the above will be examined before any others.

If economic analyses lead you to a conclusion that financial liquidity might be affected, we recommend prompt submission of an application for a relevant relief. Such application should be supported with adequate financial forecasts and a description of the taxpayer’s justified interest which – in our opinion – emerges when the ability to engage in business operations is restricted on the basis of a special-purpose act.

Requests and recommendations

In our opinion, the solutions presented by the aforesaid Ministries are incomplete, meaning that additional reliefs and facilitations should be added to them. In view of limited resources, it might turn out to be impossible to perform tax and accounting obligations in a timely fashion. In particular, the special-purpose act should include solutions that reschedule the deadlines for tax/accounting obligations, incl.
• postponing deadlines for submission of annual CIT-8 returns for 2019, annual PIT returns for 2019 and the annual IFT-2R form for non-residents;
• postponing the deadline for preparation, signing and approval of 2019 financial statements;
• lack of sanctions for failure to timely submit SAF-T, VAT returns and mandatory disclosure reports, or (optionally) deferral of submission dates;
• lack of sanctions for untimely payment of CIT, PIT and VAT advances, as well as property tax instalments;
• suspension of ongoing tax audits and refraining from any new ones.

Please feel free to contact us and communicate your needs related to the ad-hoc assistance that should be offered as part of the special-purpose tax act. Any needs that you report will be forwarded to relevant Ministries.

0% VAT on donation of medical products

In the meantime, on March 12, 2020, the Ministry of Finance published a draft regulation pursuant to which entities that donate the following types of goods will be able to apply the 0% VAT rate on such donation: medical devices, laboratory glassware, laboratory equipment, medicines, active substances, biocidal products (only disinfectants and specialist diagnostic tests used for analysis and identification of pathogens in water, air and soil), personal protective equipment (only masks, protective suits, shoe protectors, caps and gloves). The above applies on condition that a written donation agreement is executed between a taxpayer and the Material Reserves Agency or the Central Base of Sanitary and Anti-Epidemic Reserves, clearly specifying that the donated goods will be used for the aforesaid entities’ tasks related to combating risks caused by SARS CoV-2. In our opinion, donors should retain their right to deduct VAT on the donated goods. The draft act entails the possibility to apply the 0% VAT rate for donations made between February 01, 2020 and August 31, 2020.