TAX Alert | June 2016 | CFC regulations

Until 30 September 2016, the taxpayers holding shares in so-called controlled foreign companies (CFC), may be obliged to prepare separate tax records, enabling the taxable income assessment for 2015, file a CIT-CFC / PIT-CFC tax return and pay the due tax (relates to the CFCs with calendar tax year).

• Taxpayers holding at least 25% of shares (voting rights or rights to participate in income) in a foreign entity or shares (voting rights or rights to participate in income) in an entity having its registered office or management in a country with harmful tax practice (“tax havens”) are required to keep relevant register of such companies.
• After the end of CFC’s fiscal year, not later than by the deadline for CIT-CFC / PIT-CFC tax returns filing, taxpayers must prepare separate tax records of taxable events taking place in a CFC, enabling the yearly taxable income assessment. Records must include fixed assets and intangibles as well as information necessary to determine the amount of tax write-offs. This obligation does not apply to situations where the CFC is located in the EU or the EEA and conducts the effective business activity.
• Tax records and the register should be made available within 7 days after the tax authority request.
• If a taxpayer does not provide the register or tax records in due time or the or CFC income cannot be determined based on them, then the CFC income will be assessed by the Polish tax authority.

• CFC income should be assessed by the taxpayers under the Polish tax regulations.
• ax return should be filed by the end of the 9th month after the end of the CFC’s fiscal year. The tax due should be paid within the same deadline.
• If a taxpayer participates in profits in more than one CFC, he is obliged to submit a separate tax return for each of these companies.

HOW TO PREPARE?

New regulations not only represents new obligations for the taxpayers, but also represents a new area for tax authorities audits.

Therefore, we encourage you to duly and timely prepare and implement all necessary tax compliance procedures. In this regard, we offer our full support at every stage of implementation, including full outsourcing of the process. Since the tax obligations arise for the first this year, we particularly recommend taking following actions:

• analysis of foreign companies in your group structure and identification of entities meeting the CFC criteria,
• analysis of the business activities of CFCs, as well as sources of income they generate (passive vs. active income, effective vs. artificial business activity),
• gathering of all relevant data from the foreign entities, enabling preparation of the tax records and income assessment.