Tax customs & excise /

Tax on ‘passed-on’ income

The project named “the Polish Order” also provides for legal provisions limiting the passing of income on to related entities whose registered seats or management boards are located in jurisdictions of low effective tax rates. This new term, the so-called ‘passed-on’ income, is to constitute another source of revenue taxed by a flat-rate income tax. The ‘passed-on’ income is understood as costs incurred directly or indirectly for the benefit of a related entity if:

  • the income tax factually paid by this related entity is lower by 25 per cent than the amount of income tax which would be due from it pursuant to the Polish legal provisions; and
  • these costs would constitute at least 50 per cent of the value of the revenue obtained by this entity.

The legal provisions will not be applied in the case of costs incurred for the benefit of a related entity subject to taxation on its entire income in a EU member country or in a country belonging to EEA and which conducts a significant factual economic activity in this country.

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