How do they work and what do they mean in practice for smaller businesses struggling to survive in the pandemic? The Anti-crisis Shields that support Polish entrepreneurs affected by Covid-19 have recently been modified.
These shields, first introduced in March 2020, consist of a range of legal regulations designed to relieve entrepreneurs from some of their existing tax obligations.
Nevertheless, the economic impact of the Covid-19 epidemic has left some businesses struggling to pay their tax, driving the introduction of these new measures.
Since 20 October tax support has been available through the modification of existing arrangements. Now, entrepreneurs can benefit from:
- making tax payments without a fee for the extension of payment terms or other tax reliefs
- zero VAT rate for certain items
- tax relief on research and development
- IP Box relief.
It is also now possible to pay tax in instalments and there are other forms of relief available, such as tax deferral or cancellation of tax arrears.
The 0% VAT rate, which specifically applies to medical devices, laboratory apparatus or personal protective equipment like masks, is to remain in force until Covid-19 control regulations and measures in Poland are officially ended by the government.
Eligible R&D costs can be deducted from income to calculate the advances that the taxpayer incurred in 2019 for activities directed at counteracting COVID-19.
IP Box relief, on the other hand, involves paying a 5% rate on income from intellectual property rights, incurred since 1 March 2020. Before March 1, 2020, the rate was the same, but it was not possible to settle the discount in monthly advances, but only in the annual settlement.
How the measures help
In order to receive this financial aid, businesses are obliged to collect documentation, ideally on an ongoing basis.
It should be pointed out that any government subsidy received in the circumstances is treated as a loan and, for SMEs and microbusinesses, does not count as taxable income under the Personal Income Tax Act and the Corporate Income Tax Act.
Give that the loans are not treated as income, any expenditure incurred by the taxpayer has to be treated as tax deductible expenses.
However, some questions still remain as to whether Anti-Crisis Shield funds received by businesses should be treated as income and whether expenditure incurred may be treated as tax deductible. The regulations have been described so imprecisely it is still not known what the tax implication of the loan cancellation will be.
Certain controls apply to the granting of government aid. The legal regulations behind the Anti-Crisis Shield require free access to information about any business transactions, so it is advisable for businesses to ensure they co-operate and make information available to the authorities.
For example, companies might be asked to provide bank statements or proof that they meet all the requirements for receiving aid, including evidence of a fall in turnover.
And in order to protect themselves from potential irregularities around their use of aid, businesses should determine what measures they might need to take in advance and ensure any expenditure related to government support meets the criteria.
In addition, the taxpayer should document all information which may constitute evidence in the event of an inspection, and carefully supervise all aid-related expenditure to ensure there are no irregularities.
For more information, contact:
Date: December 2020