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TPA Horwath – who we are, what we do

9th place among the "Top Ten" professional service networks worldwide -

over 190 member firms in 118 countries

Over 680 offices and more than 29,000 staff

WORLDWIDE

IN EUROPE

11 countries

25 offices

Over 1000 employees

established in 2005

over 150 employees

3 offices: Warszawa, Poznań, Katowice

IN POLAND


Current tax environment in Poland – overview

International Tax Law

Community law of the EU

International Conventions

TAX ENVIRONMENT

PLANNED ANTI-AVOIDANCE RULE

Artificial structures• over-complicated / complex,• substance over form rule.• Significant tax benefit: >

PLN 50k .• Risk limitation: a protecting

opinion.

BEPS PROJECT

Reasons existing gaps in tax laws

exploited to generate double non-taxation,

the fairness of tax systems undermined.

Planned tools Strengthened CFC rules, Changed definition of PE, Transfer Pricing, Country by Country

reporting, A multilateral instrument

that modifies bilateral tax treaties.

TP DOCUMENTATION:

Additional tax liability: 50% CIT on the difference between the declared and the assessed income (if no TPD)

Planned amendments Submission deadline: the

day of filling CIT return (7-day period still in force)

Limits: General: EUR 2m Master file: EUR 20m Benchmark: EUR 10m Country by country

reporting: EUR 750m


Ex-ante protection: - positive tax ruling received before the transaction, Generally no adverse tax consequences even if a ruling is changed in the future (no obligation to pay outstanding tax, penalty interest or penal fiscal liability)

Ex-post protection: - positive tax ruling received after the transaction. If a ruling is changed in the future, the obligation to pay the outstanding tax may arise, but no interest for late payment or sanctions from penal fiscal code

Polish tax rulings system

Tax rulings system

General and

individual tax rulings

Planned amendment

s

Costs: EUR 10 per

question

Waiting periods: up to 3 months

Procedure aimed at

protecting taxpayers

Introduction of a „group” application for tax ruling

Ensuring the coherence of the system (not issuing individual tax rulings in cases covered by the general tax rulings)


Asset deal vs share deal

Asset deal Share deal

Taxation of gains on disposal

CGT: 19% x the hidden reserve CGT: 19% (if real estate clause in DTT)

Tax step-up possibility Yes Certain restructuring possibilities available

Responsibility Generally no responsibility of the purchaser for the tax liabilities of the vendor.

Purchaser takes over all tax liabilities of the acquired company.

Indirect taxes VAT @ 23% or exemption (voluntary or obligatory). In case of exemption Stamp duty (PCC) @ 2% (payable by the the purchaser)

Stamp duty (PCC) – 1% (payable by the the purchaser)

Preparation to closing:

VAT Tax rulings, VAT side letter, and tax clearance certificates

Indemnities or / and warranties in SPA

Preferable for the purchaser Preferable for the vendor

Asset deal:

The hidden reserve affects return on investment for the vendor. Preferred option - revealing the reserve in a tax neutral way before transaction.

Share deal:Deferred tax liability based on i.a.: the hidden reserve, unrealized FX differences, tax losses, impacts the price.Standard market practice: 50 to 50 share of deferred tax liability.


Taxation of disposal of Real Estate in CEE Countries - comparison

ShareDeal

Asset Deal ROMANIA

SLOVAKIA

CZECH REPUBLICPOLAND



The tenants can terminate the lease contracts in case of an asset deal - not possible in a share deal.

Limitation of tax deductible costs in case of asset deals up to the value of the income from disposal.

Planned introduction of favourable tax treatment for holding companies (e.g. tax exemption for capital gains from the sale of shares, liquidation proceeds).

By the end of the year 2015, significant amendments to the tax legislation are planned (e.g. VAT reverse charge mechanism for taxable supplies of land and constructions - measure aimed to incentivize the business environment by improving the cash-flows and to fight tax evasion as well).

4% real estate acquisition tax applicable on asset deals, whereas no transfer tax applies on share deals.

CGT on an asset deal subject to CIT at 19%.

CGT on a share deal may be CIT exempt if further conditions satisfied.

CZECH REPUBLIC

SLOVAKIA Share Deal

ROMANIA



POLAND

Share deals preferred by

vendors, while asset deals

more attractive to buyers.

No responsibility of the purchaser

for the tax liabilities of the vendor in the case of asset

deal.

Asset deal allows to avoid burden of indirect taxes as it typically does not

occur PCC/ Stamp duty. Incurred VAT should generally be recoverable.

AssetDeal


Available structuring possibilities

The Limited Liability Partnership (spółka komandytowa)

Possible tax neutral repatriation of profits, preceded by a share for share exchange and transformation of RE company into Limited Liability Partnership.

Tax ruling required

Division by separation (spin-off)

Depending on the form of separation (business or part thereof): Possible step-up on

the value of assets (including property),

Possible tax loss creation (possibility of future utilization).

Tax rulings required

PGK (a tax fiscal group)

Possible step-up on the value of assets (including property)

Possible quick and more efficient settlement of tax loss.

No TP between group companies.

Tax neutral donations between group companies.

Tax ruling required

SKA (the limited joint-stock partnership)

Still available SPVs with amended tax year (until October 2015).

Deferred / no taxation on property disposal.

Tax ruling required


Distribution of profits / Divestment

DividendsCIT 19%

DTT 0-15%

Exemption (Parent-Subsidiary Directive,

CIT conditions)

Plain Vanila Loan CIT 20%

DTT 0-15%

Exemption (Interest & Royalties Directive, CIT

conditions)

Management feesCIT 20%

Exemption (DTT, CIT conditions, proper documentation)

Profit Participating Loan

High risk of disallowing interest deduction

Distribution of profits


Małgorzata DankowskaPartner | Tax AdvisorReal Estate

tel.: +48 22 64 79 [email protected]

Krzysztof KaczmarekManaging Partner | Tax AdvisorReal Estate

tel.: +48 61 63 00 500 [email protected]

Thank you for your attention

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