Innovation in business is undoubtedly a good direction. For years, the trend of establishing start-ups has not weakened, and despite the fact that most of them are failing, everyone dreams of becoming a so-called A “unicorn” (a start-up with a valuation of $ 1,000,000,000). Nevertheless, innovation is also automation – production companies that invest in the robotization of workplaces are in the lead here. Robots in the long run are a great way to increase production and minimize costs – they can work in harsh conditions in 3 shifts, non-stop. They do not go on sick leave, do not have holidays and do not demand pay raises. In addition – from the tax point of view – they have one more advantage – they are a method of taking advantage of the robotization relief.

Relief for robotization – announcements of the Ministry of Finance

Every entrepreneur planning (or using) robotization is certainly waiting impatiently for specific provisions in the act. The fact is that at the moment the robotization tax relief is still in the design phase – no law has been signed in this regard yet. Nevertheless, the Ministry of Finance has announced that the robotization relief will appear in 2021 and will be valid for five years (i.e. until the end of 2025).

Entrepreneurs can count on the deduction of 50% (say: fifty percent) of the costs incurred for investments in robotization. The good news is that all entities can benefit from this relief – regardless of the size or type of industry. Certainly, production plants will benefit the most from this – not only will they deduct half of the costs, but also increase work efficiency and significantly reduce employee costs. It is worth mentioning that the relief is also to cover the expenses incurred for training employees operating the robots and the costs of leasing robots.

Tax relief for robotization – what can be deducted?

According to the announcements of the Ministry of Finance, enterprises will be able to deduct from the tax base 50% of eligible costs incurred for investments related to:

• Purchase of new robots and cobots;
• Purchase of software;
• Purchase of various types of necessary equipment (including motion sensors, controllers, tracks, rotators, end effectors);
• Purchase of health and safety equipment;
• Purchase of training for employees operating robots.

Relief for robotization – similarities to R&D and IP Box relief

Currently, many entities use R&D and IP Box reliefs – on the basis of the data on these reliefs, the Ministry of Finance is preparing a draft robotization relief bill. It is estimated that thanks to it, the number of robots on the market will more than double. This is to translate into the reduction of employees holding positions that require monotonous and physically heavy activities and – as a result – increase in work efficiency, and thus increase in competitiveness.

As the project is based on a research and development tax relief project, it is not surprising that the procedures will be similar – the costs incurred for robotization will be deductible during the tax year, and at the time of submitting the annual tax return – an additional write-off will be made. We can only wait for the legislation to enter into force.

All legal entities with revenues of up to the equivalent of EUR 2 million have a reason to be happy. From 2021, the content of certain acts has changed, thanks to which taxpayers can take advantage of the right to a 9% corporate income tax rate. Specifically: Art. 2 Section 14 of the draft law concerning Article. 19 of the CIT Act provides for the replacement of the phrase “EUR 1,200,000” with “EUR 2,000,000”. What is worth knowing about this topic? We explain.

Right to 9% corporate tax rate since 2021. – what changes are assumed?

In 2020, changes to the regulations included the so-called “Small CIT taxpayers” – the revenue limit for them has been increased from the equivalent of EUR 1,200,000 to EUR 2,000,000. From January 1, 2021, the changes affect more taxpayers, as more laws have been updated.

• The following have changed:
• Personal Income Tax Act;
• Corporate Income Tax Act;
• Act on flat-rate income tax on certain revenues earned by natural persons;
• Other Acts.

What does this mean in practice? To apply the preferential income tax rate, two conditions must be met:

Revenues in the current year may not exceed PLN 9,097,000;

Revenues in the previous tax year (i.e. in 2020) did not exceed PLN 9,031,000 gross (including VAT due).

The differences in the amounts result from the Euro exchange rate – it is converted accordingly:

In 2021 – the average exchange rate of the National Bank of Poland from January 4, 2021 (PLN 4.5485 / EUR 1);

In 2020 – the average exchange rate of the National Bank of Poland from October 1, 2020 (PLN 4.5153 / EUR 1).

Right to a 9% CIT rate from 2021 – what about taxpayers with a shifted tax year?

It happens that the taxpayer starts the tax year differently than the calendar year. Namely – it could have started before January 1, 2021 or will end after December 31, 2020. What then? If the income of such a taxpayer before December 31, 2020 did not exceed the equivalent of EUR 2,000,000, he may apply a preferential CIT rate of 9% until the end of the month in which their income will not exceed this amount. How do you convert 2,000,000 Euro into PLN in this case? Check the average exchange rate of the National Bank of Poland on the first day of the tax year for the taxpayer.

Right to a 9% CIT rate from 2021 – limited partnerships

Last year, the so-called “Small taxpayers” or taxpayers starting their business at that time could benefit from a preferential rate. Thanks to the amendment of November 9, 2018 amending certain acts, the provisions entered into force on January 1, 2020. The new regulations translate into the possibility of using a 9% income tax rate by limited partnerships that became (or will be – from May 1, 2021) ) corporate income tax payers. However, there is one condition that they must meet in order to be able to apply the 9% rate – their revenues in 2020 did not exceed PLN 9,031,000 gross.

Right to a 9% CIT rate from 2021 – who cannot take advantage of the preferential rates?

Unfortunately, not all taxpayers can breathe a sigh of relief – there are those who are excluded from the right to 9% of the CIT rate. Art. 18 and Art. 19 of the Amendment Act, the transitional regulations clearly indicate which CIT taxpayers are required to apply a higher (i.e. previous) revenue limit. Specifically: these are taxpayers who in the period from December 1, 2020 to December 31, 2020:

• They were established as a result of restructuring activities (indicated by the legislator) – that is through: transformation, merger or division (this does not apply to transformation of the company into another company) transformation of an entrepreneur who is a natural person or a company that is not a legal person or will contribute the equivalent of EUR 10,000 (45,000 PLN after conversion according to the exchange rate of the National Bank of Poland from October 1, 2020) towards the capital of the taxpayer of the enterprise / its organized part / components of its assets / assets obtained through liquidation proceedings of other taxpayers;
• They were subject to restructuring measures (indicated by the legislator), that is: they made a division, brought their enterprise / its organized part / assets of the enterprise / assets obtained through the liquidation proceedings of other taxpayers (in whom they had shares), as a contribution to another entity – with a value of in excess of PLN 45,000.

The number of taxpayers who, from January 1, can enjoy a higher income limit in order to benefit from the preferential 9% CIT rate, has significantly increased. In some cases, taxpayers must meet certain conditions – which we have discussed in this article. If in doubt – we recommend contacting us, we have the taxes at our fingertips.

Unreliable debtors are a big problem for companies. First of all – receivables are not regulated by them, which in consequence is not so much a lack of profit as a loss. Secondly – a double loss, because the creditor has to pay income tax on the income that he has not actually obtained – because he has not received the amount due. Moreover, the debtor in such a situation was not forced by the letter of the law to reduce tax costs – despite the fact that he did not really pay. It used to be like that, now the situation has changed a bit – there is bad debt relief in PIT and CIT, similar to bad debt relief in VAT.

Bad debt relief for PIT and CIT – what is it about?

The regulations are clear – a debtor who has not paid the amount due within 90 days from the date of expiry of the payment deadline on the invoice (bill) or contract is obliged to increase the tax base by the value of the amount due. In turn, the creditor may apply the opposite action – that is, increase the costs due to the failure to receive payment from the debtor. As you can see – arrears in payment have consequences for both parties to the transaction.

Previously, the problem was more complicated – the income tax due had to be paid, and the change of unpaid payment at the expense of the creditor became a fact after long and difficult proceedings. This was because such a claim had to be documented as irrecoverable and the following decisions had to be obtained:

• About irrecoverability – issued by an enforcement authority (e.g. a bailiff);
• On dismissal of the bankruptcy petition or on the discontinuation / termination of bankruptcy proceedings – issued by the court;
• Protocol drawn up by the taxpayer, showing that the costs of the proceedings and enforcement exceed the amount due.

Bad debt relief in PIT and CIT – who can and who cannot take advantage of it

Technically – the answer to the question “who cannot take advantage of the bad debt relief in PIT and CIT?” it is simple. The legislator clearly specifies – this relief cannot be applied to commercial transactions between related entities. So it seems that in every other case the matter is simple, but – as is usually the case – the reality is a bit different. Currently – due to COVID-19 – the conditions for using the bad debt relief in PIT and CIT have been eased, among others the deadline of 90 days from the date of expiry of the payment deadline has been reduced to 30 days – but it applies to tax advances. On an annual basis, the deadline of 90 days still applies. In addition, the shortened period applies to the debtor, the creditor does not have to increase the income tax advance.

Bad debt relief in PIT and CIT – the interpretation of the tax office matters

Another issue is the interpretation of regulations by the tax office – and this one is usually strict. An example is the interpretation No. 0111-KDIB1-2.4010.344. 2020.1.AK – concerning a company from the financial industry. The company wanted to take advantage of the tax relief when calculating CIT advances on a monthly basis, and the problem related to the lack of payment for services by the company’s contractors. In the light of the law – the company has the right to perform such an action, but the tax office has presented its own interpretation:

• It is necessary to verify on the part of the debtor – whether the unregulated transaction took place as part of the contractor’s business activity;
• Both parties to the transaction must operate in Poland;
• Debtor status must be verified before calculating income tax advances;
• The contractor may not be in the process of bankruptcy / liquidation / restructuring.

The tax office stated that in this situation the company was not entitled to the relief. If the legislator does not intervene, the company will not benefit from the relief. It is much easier to take advantage of the bad debt relief for VAT – the ruling of the Court of Justice of the European Union, which is a precedent (reference number C 335/19), is not without significance in this matter. You can find more about the relief for bad VAT debts and the CJEU ruling here. If you have any doubts regarding the optimization of taxes and the use of bad debt relief – contact us. Taxes are our bread and butter, we help businesses develop every day.