Strategizing International Tax Best Practices – by Keith Brockman

Poland’s Corporate Income Tax Law will be formally amended, effective 1/1/2018.

  • One of the most important provisions is the limitation in intercompany royalty and service payments, using an absolute limitation and EBITDA basis.  (Note, a corollary offset does not provide matching offsets for the income inclusion by intercompany affiliates.)

This limitation goes beyond the OECD’s guidelines, and extrapolates interest deductibility  that is veiled as a “base erosion” device.

Multinationals need to review and plan accordingly for this limitation, which provides some APA safe harbors obtained with the Polish Ministry of Finance.  To the extent an APA is not possible and the limitation is exceeded, a company’s effective tax rate will be increased by this legislation.  

EY’s summaries of this important development are included for reference:

http://www.ey.com/Publication/vwLUAssets/Poland_-_Advanced_Pricing_Agreement_to_remove_new_limitation_on_tax_deductibility_of_intra-group_charges/$FILE/2017G_06049-171Gbl_Poland%20-%20APA%20to%20remove%20tax%20deductibility%20limitation.pdf

http://www.ey.com/Publication/vwLUAssets/Alert:_Poland_passes_2018_corporate_income_tax_reform/$FILE/2017G_06726-171Gbl_Poland%20passes%202018%20corporate%20income%20tax%20reform.pdf

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