These costs comprise remuneration for the right to use assets which were owned by the shareholder or an entity related to the shareholder prior to establishing the paying entity. A taxpayer acting reasonably would not incur such costs or would incur them in a lower amount if the benefit was provided by a non-related entity. The amount and/or timing of the payment are dependent on the profit earned. These costs would be regarded as the hidden dividends if one of the following conditions is met: According to the legislative explanation, the intention of the new regulations is to prevent the tax deductibility of payments which economically are profit distributions.Īccording to these new provisions, costs incurred by a corporate taxpayer in relation to a service or other performance provided by a related entity (not only a shareholder though) can be disallowed for CIT purposes if they are determined to constitute hidden dividends. One of the significant changes proposed under the Polish Order is limiting the tax deductibility of payments classified as “hidden dividends.”įor an overview of other proposed amendments, see EY Global Tax Alert, Poland: Major tax reform proposal moves to Parliament, dated 17 September 2021.Īccording to the draft proposal, payments classified as “hidden dividends” would not be tax deductible for Polish CIT purposes. 
The majority of the provisions are expected to come into force as of 1 January 2022.
Representatives of the Polish Government, on 8 September 2021, submitted draft legislation to the Polish Parliament on the major tax reform referred to as the “Polish Order." The changes would affect several areas of taxation including Corporate Income Tax (CIT), Personal Income Tax (PIT), and Value Added Tax (VAT). Poland plans to limit tax deductibility of payments considered hidden dividends
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