| In Principle

At the end of August 2018, the Ministry of Finance announced future significant changes in the most important tax acts. These changes are to enter into force at the beginning of 2019. We wrote about some of these here last week. Now we present further changes proposed by the Ministry of Finance, as published in the draft act of 24 August 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Ordinance and other acts, which might be particularly important for taxpayers conducting business activity.

Major changes to the Road Transport Act are in the pipeline. The changes are intended to regulate the activities of firms that act as go-betweens in passenger services, for instance by providing mobile applications or computer software.

The Polish government is currently working on a completely new tax regime applicable to income from trading in cryptocurrencies (virtual currencies) for personal income tax and corporate income tax purposes. For PIT purposes, this income is to be taxed as income from cash capital at the rate of 19% regardless of whether the turnover is of a private nature or made in the course of business activity. For CIT purposes, the income from trading in cryptocurrencies will be classified as capital gains. These new rules would apply from 1 January 2019.

Compulsory evaluation of the effectiveness of PPP projects, the possibility of obtaining an opinion on the legitimacy of a project carried out under this formula, a PPP test for projects valued at more than PLN 300 million, implementation of PPP projects via a special purpose vehicle owned by a private partner: these are just some of the changes introduced by an act recently signed by the President of Poland.

The Public Procurement Office has announced its standpoint on the form of the power of representation to sign an electronic ESPD. The ordinary written form is sufficient.

Demand guarantees are among the most popular methods of securing international commercial transactions. They may be used to secure both the payment of fees and satisfactory performance of particular works. The popularity of these guarantees (sometimes also referred to as payment guarantees) can be attributed to the fact that they are issued by trustworthy and globally recognisable financial institutions (usually banks and insurance companies), and their operation is governed by universal rules well-understood in the business community. Guarantees are also independent of the underlying relationship between the parties, and the payment conditions are based on objective criteria, eliminating the potential for unexpected interpretations and actions by the parties. Given these factors, it is understandable that disputes regarding payment guarantees can usually be avoided. However, when they do occur, they usually involve substantial sums, with the potential to affect the financial liquidity of the companies involved.

Regulations introducing the split payment mechanism for VAT entered into force in Poland on 1 July 2018. This mechanism in B2B transactions is designed as a weapon in the fight against VAT fraud.

Businesses are not required to use the split payment mechanism. But the initiative left to them does force them to examine whether it would be worthwhile to take advantage of this new instrument. Lawmakers went to some effort to encourage taxpayers to say yes.

The split payment mechanism for business-to-business transactions entered into force on 1 July 2018. Introduction of this mechanism was motivated by the aim of closing gaps in the tax system. But split payment affects not only the situation of VAT payers, but also banks.

Factoring is growing rapidly in Poland. According to the Polish Factors Association, the value of receivables that are the subject of factoring is growing year on year by an average of 18%. Introduction of split payment may strike at the financial liquidity of firms seeking financing, but it may also drive growth in the factoring industry. But every rose has thorns. Split payment complicates factoring transactions and introduces new risks for factors.

The judgment issued on 25 July following a request for a preliminary ruling from an Irish court in case C-216/18 PPU L.M. does not essentially differ from the opinion issued by the advocate general. The CJEU stated specifically the circumstances in which the executing authority can find an exception to the principle of mutual recognition, but placed the final decision in the hands of the national court executing the European arrest warrant.

The European Court of Justice (CJEU) has ruled that Christian Louboutin’s famous red sole does not consist solely of a shape that significantly increases the value of a product, and therefore can be registered as a trademark. This is an important victory for the fashion designer in the long-running battle concerning red-soled shoes.