Proposed changes to PIT and CIT regulations from 2027

Draft amendment to the PIT and CIT laws - what will change from 2027?

An updated version of last year’s draft law amending the PIT, CIT, and flat-rate income tax acts has been published on the Government Legislation Centre's website. The draft responds to what the Ministry of Finance and Economy perceives as an increasing scale of tax optimization that affects the depletion of tax revenues to the state. The amendment proposes a number of significant changes for both companies and individuals. Most of them are set to come into effect on January 1, 2027.

Hidden dividend and debt push-down

The draft excludes from deductible expenses fees for intangible services (e.g., advisory or management) paid to related individuals by CIT taxpayers. This change targets the popular practice of distributing profits in the form of invoices instead of dividends, which allowed for combining lower taxation on the partner's side with a simultaneous reduction in the company's income. The draft also tightens regulations regarding debt financing in debt push-down structures, meaning that refinancing and consolidation loans related to original capital transactions will be subject to previously circumvented restrictions.

Estonian CIT - new rules and amnesty for late filers

Regarding the Estonian CIT, the draft eliminates the option to choose this form of taxation during the tax year and expands the catalog of benefits treated as hidden profits. At the same time, it provides for a form of amnesty. The effectiveness of the transition to the Estonian CIT will also be recognized in cases where the financial statement was signed by the unit manager after the deadline, even if it was not signed by the person maintaining the accounts.

Transformations and M&A transactions

The draft closes several commonly used loopholes related to restructurings. First, upon the disposal of shares in a company formed from a transformation, the tax cost will only include historical expenses for acquiring shares in the transformed company, not their book value. This eliminates the so-called step-up mechanism. Second, income from the liquidation of a partnership formed from a CIT taxpayer transformation will be taxed if the liquidation occurs within 3 years of the transformation. Third, the draft excludes the possibility of amortizing goodwill arising from the financial leasing of the enterprise.

Rental, housing relief, and cars

The draft also introduces changes significant from the perspective of PIT taxpayers. Rental income from related entities exceeding PLN 100,000 per year will be taxed at a rate of 15% - regardless of whether the rental occurs privately or as part of business activity. The conditions for using housing relief will also be clarified - it will only be available if the taxpayer has not used it in the 3 years preceding the sale of the property. Additionally, the rules for determining the level of CO₂ emissions for the purposes of passenger car depreciation limits will change, moving away from the central vehicle registry as the sole source of evidence.

Summary

The proposed regulations have a broad scope and may significantly impact ownership structures, M&A transactions, and the daily tax settlements of entrepreneurs. Early analysis of the planned changes and appropriate adjustment of the business structure to the new regulations will help avoid unpleasant surprises after they come into force. If you want to assess how the UD116 draft will affect your tax situation, we invite you to contact us.

Source:

https://legislacja.gov.pl/projekt/12402157