Month: May 2025

On 6 October, the Sejm adopted a law amending certain acts to counteract usury. The so-called anti-usury law, according to the authors of the government bill, aims to undertake comprehensive and coordinated measures both in criminal law and through intervention in civil law relations, targeted at eliminating the pathology of usurious loans. To a limited extent, anti-usury provisions have existed in Polish legislation since 2001 (initially in the Consumer Credit Act), but a report prepared by the Advisory Scientific Committee at the Financial Ombudsman, as well as the number of complaints submitted to the Ombudsman, indicates that the existing regulations have not sufficiently met their intended goals.

Existing anti-usury provisions are insufficient

Findings from the above-mentioned report showed that lending institutions operating on the Polish financial market continue to commit abuses against consumers (there is a noticeable upward trend in the number of complaints lodged by consumers). Irregularities vary in nature and occur both at the pre-contractual stage and during the conclusion and performance of the contract. Lenders structure the contract terms to burden the client with the highest possible non-interest loan costs. There is also frequent artificial extension of the consumer credit repayment period, which allows the lender to charge higher non-interest costs. A significant problem in the non-bank consumer credit market is the application by lending institutions of very high fees and commissions, which are excessive relative to the credit services provided and in most cases disproportionate to the lender’s activities performed.

Main changes introduced by the amendment

1. The new law provides that on the day of concluding the contract, the amount of non-interest costs (including additional service costs, in particular insurance) shall not exceed twice the statutory interest, i.e. the amount specified in the formula contained in the proposed Article 720(2) § 1 of the Civil Code (hereinafter the C.C.), which in turn refers to the maximum interest level set according to Article 359 § 2(1) C.C. Compared to the solutions adopted in the Consumer Credit Act, a loan granted under the Civil Code will on one hand be less profitable for the lender, and on the other less costly for the borrower, than loans granted within strictly regulated business activity. This difference results from the absence of additional costs related to business operations and compliance with supervisory requirements, as well as higher standards of transaction safety guaranteed by professional entities (e.g. in terms of information obligations or protection against lending to insolvent persons).
2. Non-interest costs over the entire loan repayment period may not exceed 25% of the total loan amount. If non-interest costs exceed this maximum level, only the maximum non-interest costs shall apply.
3. The total security for claims related to the loan shall not exceed the sum of the loan principal increased by statutory interest calculated directly on that amount for the loan period, maximum default interest calculated on the loan amount for up to 6 months, and maximum non-interest costs. Furthermore, security in the form of a mortgage or registered pledge will be prohibited. This change aims to strengthen the protection of natural persons who have been granted monetary loans against unjustified restrictions on their ability to manage their own property.
4. The lender will be obliged to inform the consumer in a clear and understandable manner about the total amount the consumer will be required to pay under the contract.
5. In the case of early repayment of the loan, interest cannot be charged for the period remaining until the end of the term for which the loan was granted under the contract. Meanwhile, non-interest costs shall be reduced by the costs relating to the period by which the loan term has been shortened, even if the borrower incurred those costs before early repayment.
6. The maximum amount of non-interest costs of a consumer credit calculated according to Article 36a(1) of the Consumer Credit Act will be reduced to 10%. Currently, these values are respectively 25% (costs independent of the credit period) and 30% (costs dependent on the credit period). Independently of the above, the limit on non-interest costs over the entire credit period will be lowered from the current 100% of the credit amount to 45% of that amount.

The law is to come into force within 6 months of its publication. Some provisions will apply from 1 January 2023.

We invite you to cooperate

ATL LAW law firm has experience in legal advice in competition law and consumer protection law for entities representing various sectors of the economy. We provide services to both Polish and foreign clients. If you have any doubts regarding compliance of your current practices with the new regulations due to the upcoming amendment, please contact us and learn more about our Competition and Consumer Protection Law offer.

 

On 6 October, the European Union adopted a new eighth package of sanctions against the Russian Federation. This decision was a response to Russia’s ongoing aggression against Ukraine, the organisation of illegal sham “referenda” in parts of the Donetsk, Kherson, Luhansk, and Zaporizhzhia regions currently illegally occupied by the Russian Federation, the unlawful annexation of these Ukrainian regions by the Russian Federation, as well as mobilisation in the Russian Federation and renewed threats regarding the use of weapons of mass destruction.

What does the eighth sanctions package contain?

• The list of goods and technologies subject to restrictions has been expanded to include those that may contribute to strengthening the military and technological potential of the Russian Federation or to the development of the Russian defence and security sector, by adding certain chemical substances, paralysing and convulsant agents, and goods that have no other practical use than to carry out the death penalty, torture or other cruel, inhuman or degrading treatment or punishment, or which could be used for such purposes.
• The ban on the import of steel products originating from or exported from the Russian Federation has been extended. Import restrictions have been imposed on additional products that generate significant revenues for the Russian Federation. This ban applies to goods originating from or exported from the Russian Federation and includes products such as wood pulp and paper, certain components used in the jewellery industry such as stones and precious metals, some machinery and chemical products, cigarettes, plastics, and finished chemical products such as cosmetics.
• The export ban has been expanded by adding new products to the list of goods that could contribute to increasing Russian industrial capacity. Furthermore, restrictions have been imposed on the sale, supply, transfer, or export of additional goods used in the aviation and nuclear energy sectors.
• The criteria for listing entities subject to transaction bans have been broadened to include entities indirectly linked to Russian state-owned or state-controlled entities that facilitated the circumvention of sanctions.
• The threshold for the existing ban on providing services related to crypto-asset wallets, crypto-asset accounts, or custody of crypto-assets to persons in Russia or Russian residents has been removed, thereby prohibiting such services regardless of the total value of those crypto-assets.
• The existing ban on providing certain services to the Russian Federation has been extended to include architectural and engineering services, as well as IT consultancy and legal advisory services.
• The provision of technical assistance related to goods exported to Russia remains possible, provided that at the time such assistance is given, the sale, supply, transfer, or export of those goods is not prohibited under sanctions regulations.

Consequences of breaching sanctions on Russia

Pursuant to Article 8 of Council Regulation (EU) No 833/2014, Member States adopt rules establishing sanctions applicable in cases of breach of sanctions provisions and take all necessary measures to ensure their enforcement. Penalties imposed must be effective, proportionate, and dissuasive. The type and amount of penalties for non-compliance with sanctions in Poland are governed by the Act on special solutions to counteract support for aggression against Ukraine and to protect national security. This Act has not yet been amended to include the new sanctions package; however, the current penalties for violating EU sanctions include, among others:

• imprisonment for not less than 3 years,
• a financial penalty of up to PLN 20 million imposed by the Head of the National Revenue Administration.

Don’t take risks – seek legal advice

Economic law is one of the specialties of ATL LAW law firm. We have extensive experience working with foreign entities, including those outside the European Union. If you require consultations regarding sanctions imposed on Russia concerning services or export/import of specific goods, please contact us. We will analyse your individual case and assess the risks.

 

Do you have any doubts about the upcoming amendment or need advice on other labour law matters? The lawyers at ATL Law provide employers with comprehensive legal assistance in all areas related to human resource management and labour law. Our support includes advice in labour law where we deliver individually tailored solutions covering all aspects relevant from the perspective of your company, its business goals, and the specifics of your operations, ensuring legal security. We invite you to explore our offer: Labour Law Legal Advisor.

Amendment to the Labour Code

The recent months and the beginning of next year mark a period of intensive amendments to key labour law provisions, including those concerning posted workers. The changes are linked to the implementation process of Directive (EU) 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union (OJ L No 186, 11.07.2019, p. 105) into the Polish legal system. The Directive’s overall aim is to promote safer and more predictable employment, while also ensuring labour market adaptability and improving living and working conditions within the European Union.

Posted Workers Regulations 2022/2023

Amendments to the Labour Code from August 2022 introduced significant changes regarding posted workers. These mainly relate to new information obligations and protective provisions concerning the posting of employees who are parents of minor children.
According to the provision set out in Article 29 (1) § 2 of the Labour Code, effective from 1 August 2022, before an employee departs to work or perform a business task in a country that is a member of the European Union or a country outside the European Union for a period exceeding four consecutive weeks, the employer is obliged to provide the employee, in addition to previously mentioned information, with information in paper or electronic form regarding:

1. the country or countries in which the work or business task abroad will be carried out;
2. the anticipated duration of such work or business task;
3. the currency in which the employee’s remuneration will be paid during the period of performing the work or business task abroad;
4. any monetary or in-kind benefits connected with performing the work or business task abroad, where such benefits are provided by labour law provisions, regulations, statutes, collective labour agreements, or other collective arrangements, unless otherwise specified in the employment contract;
5. whether the employee’s return to the home country is guaranteed or not;
6. the conditions of the employee’s return to the home country – in the event that such return is guaranteed.

Notifying the employee about the currency in which remuneration will be paid during work or the business task abroad, as well as any changes to this condition, may be done by referring in paper or electronic form to the relevant labour law provisions, pursuant to Article 29(1) § 3 of the Labour Code.

Amendment to the Labour Code Concerning Parents of Children up to 8 Years Old

Under the August amendment to the Labour Code, the age of the child (previously 4 years) has been extended to 8 years, thus lengthening the period during which an employer may not, without the employee’s consent, require the employee to work overtime, during night hours, in a split-shift system, or post them outside their usual workplace. It is worth noting that parents of children up to 8 years old have been entitled to this right from the date the amendment entered into force (i.e., from 1 August). This provision stems from Article 178 § 2 of the Labour Code.
 

We Invite You to Use Our Services

The lawyers at ATL Law provide employers with comprehensive legal assistance in all areas related to human resource management and labour law. We also advise businesses on matters related to the international mobility of employees, including tax and social security issues. We support companies in completing formalities connected with posting employees abroad, both to EU countries and outside the European Union, relocations, as well as work performed by posted employees within Poland. We invite you to explore our service offerings both in the area of labour law and specifically employee mobility.

Amendment to the Labour Code

The past months and the beginning of next year mark a period of intensive amendments to important labour law provisions, including those concerning posted workers. These changes are connected with the implementation process of Directive (EU) 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union (OJ L 186, 11.07.2019, p. 105) into Polish law. The general objective of the Directive is to promote safer and more predictable employment, while simultaneously ensuring labour market adaptability and improving living and working conditions within the European Union.

Posted Workers Regulations 2022/2023

Changes introduced in the Labour Code as of August 2022 have brought significant amendments regarding posted workers. These primarily concern new information obligations and protective regulations related to the posting of employees who are parents of minor children.
According to the provision contained in Article 29 (1) § 2 of the Labour Code, effective from 1 August 2022, before an employee departs to work or perform a business task in a country that is a member of the European Union or in a non-EU country for a period exceeding four consecutive weeks, the employer is obliged to provide the employee, in addition to previously listed information, with information in paper or electronic form concerning:

1. the country or countries where the work or business task abroad is to be performed;
2. the expected duration of such work or business task;
3. the currency in which the employee’s remuneration will be paid during the period of performing the work or business task abroad;
4. any monetary or in-kind benefits related to performing the work or business task abroad, where such benefits are provided for by labour law provisions, internal regulations, statutes, collective labour agreements, or other collective agreements, unless otherwise stipulated in the employment contract;
5. whether the employee’s return to the home country is guaranteed or not;
6. the conditions of the employee’s return to the home country – in the event that such return is guaranteed.

Informing the employee about the currency in which remuneration will be paid abroad, as well as any changes to this condition, may be done by referring in paper or electronic form to the relevant labour law provisions, pursuant to Article 29(1) § 3 of the Labour Code.

Labour Code Amendment Regarding Parents of Children up to 8 Years Old

Following the August amendment to the Labour Code, the age of the child (previously up to 4 years) has been extended to 8 years. This results in a longer period during which an employer may not, without the employee’s consent, require the employee to work overtime, during night hours, in a split-shift work system, or post the employee away from their regular workplace. It is worth noting that parents of children up to 8 years old have been entitled to this right since the date the amendment came into effect (i.e., from 1 August). This provision is set out in Article 178 § 2 of the Labour Code.
 

We Invite You to Use Our Services

ATL Law lawyers provide employers with comprehensive legal assistance in all areas of human resource management and labour law. We also advise businesses on matters related to the international mobility of employees, including tax and social security issues. We support companies in fulfilling formalities connected with posting employees abroad, both to EU countries and outside the European Union, as well as relocations and the work of posted employees within Poland. We invite you to explore our service offerings related both to labour law and specifically to employee mobility.

The draft Act on the IT system for handling certain contracts, prepared by the Minister of Family and Social Policy, is currently at the parliamentary stage. The bill proposes the introduction of a dedicated electronic system designed to facilitate legally compliant preparation of employment contracts, mandate contracts, and activation contracts. This system will enable both the conclusion of contracts and the submission of notifications to social insurance institutions and the tax office in one place. Through the system, it will also be possible to electronically sign the aforementioned documents and send them directly.

Contract Handling System

The detailed provisions regarding the system as presented in the draft are as follows:

• Provision by the minister responsible for labour affairs of the specified document templates; access to the IT system will be granted after logging in via a trusted profile, on an individual account at the praca.gov.pl or biznes.gov.pl portals,
• Extension of the use of trusted and personal electronic signatures from official administrative matters to include employment contracts, mandate contracts, service contracts (subject to mandate provisions), and activation contracts on the praca.gov.pl portal,
• Enabling the conclusion, amendment, termination (including notice), expiration handling, and execution of other necessary actions related to the rights and obligations arising from such contracts electronically within the system,
• Introduction of a notification mechanism informing contract parties about any changes in data, receipt of declarations of intent, applications, and other documents; notifications will be sent via email to the contact address provided by the parties; additionally, SMS notifications may be sent to the contact phone number indicating that an email notification was sent; phone numbers provided will be entered into the system but will not be disclosed to the contracting party without the consent of the employee, contractor, or nanny,
• Maintaining and storing employee documentation electronically within the system.

Contracts Covered by the System

The solution proposed by the drafter applies to:

• employment contracts,
• mandate contracts,
• service contracts, to which mandate provisions apply, provided that at least one party to such contracts is a micro-entrepreneur (an entity employing no more than 9 persons), a farmer, or a natural person,
• service contracts concluded with caregivers, which must be entered into by a parent and meet the specific conditions set out in the draft act,
• harvest assistance contracts (entered into with farmers).

The Contract Handling System and the Social Insurance Institution (ZUS)

The system will also be integrated with the Social Insurance Institution (ZUS). Employers will have the possibility to submit notifications to ZUS, and the system will assist in calculating and paying social insurance contributions and tax advances, as well as determining the amount of salary payable to the employee’s bank account. Additionally, the system will allow employees to maintain electronic contact with the employment authority after losing their job.

It is important to emphasise that the solution is intended only to assist employers, contractors, or parents in calculating tax liabilities, among other things. The parties to the contract will input data into the system, based on which, for example, tax liabilities will be calculated and subsequently approved by users. Therefore, the system will only serve as an auxiliary tool facilitating certain activities. Should an employer fail to pay taxes or social insurance contributions, they will be held liable under the same conditions as any employer who fails to fulfil their obligations. The drafter does not envisage the possibility of making payments through the system.

The Act is set to come into effect 30 days after its promulgation.

 

If you require advice regarding employment structures, contract formation, or termination of employment relationships, we invite you to contact the experts at ATL Law. We provide comprehensive legal assistance to employers in all areas of human resource management and labour law. Labour Law Legal Counsel: Our support includes tailored solutions addressing all key aspects relevant to your company’s business objectives and operational specifics, ensuring its legal security.

The court sided with the position of the Social Insurance Institution (Zakład Ubezpieczeń Społecznych, ZUS), according to which the sole shareholder of a limited liability company (spółka z o.o.), who is also a member of the management board, is not subject to social insurance based on an employment contract, but is compulsorily insured for pension, disability, and accident insurance as a partner of a single-shareholder limited liability company. The main reason for the court’s assessment was the fact that, in the established factual circumstances, the legal relationship connecting the sole shareholder with the limited liability company lacked the element of employee subordination.

Factual Background

The complainant (K. Z.) was registered from 1 December 2018 for compulsory social and health insurance on the basis of employment with the contribution payer BIURO (…) Sp. z o.o. On 1 December 2018, K. Z. signed an employment contract with the company’s proxy BIURO (…). Under this contract, she was to perform work as an accountant on a 1/8 full-time equivalent basis. Prior to this, K. Z. had already been registered for compulsory social and health insurance based on employment by another contribution payer.

From 31 January 2018 to 3 October 2021, K. Z. was the sole shareholder of BIURO (…) Sp. z o.o., owning all shares. From 12 February 2021, she held 90% of the shares, while E. Z. acquired the remaining 10%.

Following the contribution payer’s registration of K. Z. for social insurance in BIURO (…), the social security authority raised doubts regarding the legitimacy of registering the complainant for social insurance based on the contract and initiated ex officio proceedings concerning the correctness of this registration. The authority indicated that from 1 December 2018, K. Z. did not meet the conditions for compulsory social insurance as an employee of BIURO (…). Based on the gathered material and cited provisions, the authority decided that the complainant is compulsorily insured for pension, disability, and accident insurance as a partner of BIURO (…) Sp. z o.o., with the contribution base not lower than 60% of the projected average monthly salary adopted for calculating the annual contribution base limit.

K. Z. appealed against the decision of the Social Insurance Institution regarding the non-recognition of the employment relationship as an accountant from 1 December 2018 to 3 October 2021. The authority requested dismissal of the appeal, simultaneously indicating that information from the National Court Register showed that K. Z. had served on the management board of BIURO (…) Sp. z o.o. from 31 January 2018 and had owned all shares, remaining the company’s president.

District Court’s Position

The court found the appeal unfounded. It emphasised that, for coverage by employee social insurance, the crucial factor is whether the parties to the contract were in an employment relationship. The existence of such a relationship, and whether it constitutes the basis for social insurance, is not determined solely by the formal conclusion of the employment contract, salary payment, joining insurance, paying contributions, and issuing a work certificate, but by the actual and factual performance of elements characteristic of an employment relationship, as set out in Article 22 § 1 of the Labour Code (Kodeks pracy, k.p.).

In the reasoning of the judgement, the court pointed to the special situation occurring in the case of a single-shareholder limited liability company, which is a particular form of conducting business on one’s “own” account, even if it is, by construction (a legal fiction), separated from the personal assets of the sole shareholder. The court noted that, according to case law, not only the absence of employee subordination within the meaning of Article 22 § 1 k.p. argues against recognising an employment relationship. There is a fundamental contradiction between the owner status and the employee status of a partner in such a case. This results from the concept of employment, which is based on the theory that the employment system rests on the exchange of services between two parties: the owner of the means of production (the employer) and the employee. Therefore, in light of the characteristics of the employment relationship and labour law—which is based on the exchange of services between the owner of the means of production and the employee—the sole (or almost sole) shareholder of a limited liability company generally cannot be in an employment relationship with that company, because the status of the work performer (employee) is “absorbed” by the status of capital owner (employer). The sole or nearly sole shareholder performs activities (even typically employee-like) for themselves (in their own interest) and at their own production, economic, and social risk. The sole shareholder is economically independent from the employer (the limited liability company) because—as the property transfer occurs within the shareholder’s own assets—there is no element of paid work, and they themselves dictate how the company is run as the shareholders’ meeting.

When Can the Sole Shareholder Be Recognised as an Employee?

The court drew attention to the criteria developed by the Supreme Court that may indicate that the sole shareholder of a limited liability company can be recognised as an employee for the purposes of compulsory social insurance:

1. the employment takes place in a specialist position related to the company’s business;
2. the findings confirm the company’s need for the shareholder’s work in that position;
3. the sole shareholder does not engage in the company’s ongoing management activities;
4. the sole shareholder is effectively subject, when performing work for the company, to orders from those managing the company or directing its individual departments.

The court emphasised, however, that to recognise the employment relationship as genuine, the company must conduct business focused on achieving its objectives set out in the articles of association and, in particular, actually conduct economic activity and employ workers for that purpose.

Business law and social insurance law are just some of the specialties of ATL LAW law firm. Our team provides legal assistance regarding social insurance both to companies and individuals. We recommend solutions that minimise the risk of negative outcomes from ZUS inspections and help resolve cases in progress. We advise companies at every stage of control proceedings. If you have doubts about planned business activities in the context of labour law or social insurance regulations, including the current interpretation adopted by ZUS and courts, please feel free to contact us.

The Trend of Moving a Business to Germany

Despite the unfavourable market situation caused by ongoing inflation and rising energy prices, Polish entrepreneurs continue expanding their operations into foreign markets. Germany leads the popularity rankings, where domestic companies offer services either directly from Poland (e.g., by delegating employees to perform a given service) or through opening a branch or establishing a new company abroad.

This often entails a tax liability in the Federal Republic of Germany (FRG). Even without establishing a business in Germany, entrepreneurs providing services from Poland (as well as delegated employees) risk being subject to the foreign tax system. The German tax office – Finanzamt – rigorously examines the grounds for tax liability. Companies wishing to avoid contact with the German tax regime must exercise extreme caution. Tax regulations governing cross-border services are ambiguous and full of exceptions, and many commonly practiced solutions are challenged during audits by German tax authorities. A good example is the famous 183-day rule stemming from the German-Polish double taxation avoidance agreement, which does not always apply (for instance, it does not apply to temporarily delegated employees abroad).

This article aims to outline some of the tax system provisions in Germany that may affect entrepreneurs who are unable to avoid foreign tax obligations.

Offer: Tax law Warsaw, Kraków, Katowice

 

German Employee Wage Tax

Tax advances are withheld by the employer before paying the salary and transferred directly to the German tax office (Finanzamt). The taxpayer then settles them independently at the end of the tax year. Income tax on employee wages in Germany consists of three components (known as Einkommensteuer):

Income tax (so-called Lohnsteuer)

This tax is progressive. Depending on the gross salary amount and tax class, the tax rate in Germany can range from 14% to 45%. Tax class affiliation affects the amount of the tax-free allowance and the way the tax is calculated.

• Class 1 – single persons, widows/widowers for at least 2 years, divorcees, separated couples, and married persons whose spouse resides outside the European Union.
• Class 2 – single parents raising children alone.
• Class 3 – married persons and widows/widowers within one year of the spouse’s death, as well as married persons where one spouse is unemployed or resides in an EU country.
• Class 4 – other married couples not qualifying for other classes.
• Class 5 – persons with a spouse in Class 3.
• Class 6 – persons employed in more than one job.

The average tax-free allowances in Germany for 2022 were €9,984 for singles and €19,968 for married couples, but exact amounts depend on the tax class. The highest allowances apply to Classes 2 and 3, followed by Classes 1 and 4. Class 5 allowance is usually around €1,200, and Class 6 has no tax-free allowance.

Solidarity surcharge (so-called Solidaritätszuschlag)

The solidarity surcharge rate is 5.5%, with the condition that it is not charged on gross earnings not exceeding €73,800 annually. For married couples and members of tax Class 3, the threshold is €151,990 due to joint taxation.

Church tax (so-called Kirchensteuer)

The church tax ranges from 0.2% to 1.5% of gross salary depending on the federal state (Land). Employees can opt out by officially leaving the church or not being registered as church members.

 

Trade Tax on Sole Proprietorships (Gewerbesteuer)

This tax applies to entrepreneurs who decide to establish a Gewerbe in Germany, equivalent to a Polish sole proprietorship. The advantage of this tax is the high tax-free allowance of €24,500 compared to Poland. Only income exceeding this threshold is taxed. The tax rate depends on the company’s location (Land) and its income, ranging from 15% to 42%.

 

Value Added Tax, i.e., German VAT (Mehrwertsteuer)

The standard VAT rate is 19%, with a reduced rate of 7%. Entrepreneurs with turnovers below €22,000 per year are exempt. New taxpayers are obliged to submit monthly VAT declarations for the first two years of business activity in Germany.

 

Corporate Income Tax (Körperschaftsteuer)

For establishing a legal entity in Germany (e.g., a GmbH – German limited liability company), the income tax rate is 15%. Additionally, a solidarity surcharge of 5.5% must be added. Tax returns must be filed by 31 May following the tax year, but taxpayers are required to pay quarterly advance tax payments throughout the year.

 

Allowances and Deductions

The complexity of the German tax system also includes numerous allowances, benefits, and deductions, often resulting in substantial tax refunds at the end of the fiscal year. Unfortunately, despite many preferences, navigating the maze of German tax regulations requires a certain level of expertise and often consultation with a foreign tax advisor. Self-preparation of tax returns and declarations can exceed the capabilities of a typical entrepreneur without accounting or tax education.

 

How to Avoid Paying Tax?

Entrepreneurs often forget that even if their activity is limited solely to cross-border service provision, i.e., providing services to German clients from Poland, there is still a risk of being subject to the foreign tax system. This is particularly true when the Polish employer delegates employees to Germany or provides services on real estate, or operates in certain specific industries. The construction sector, which remains very popular, carries additional risks. It is subject to a special construction tax withheld by the German contractor from the remuneration of the Polish company, as well as additional restrictions. If you are interested in details and ways to obtain exemptions or minimise the risk of falling under a foreign tax system (not only in Germany), please check the law firm’s offer regarding employee delegation and cross-border service provision.

 

Frozen Gas Tariffs

The Council of Ministers has adopted a draft law on special protection for gas fuel consumers in 2023 in connection with the gas market situation, submitted by the Minister of Climate and Environment. The aim is to freeze the price of gas and distribution services for 2023.
According to the statement of the Chancellery of the Prime Minister published on the government website, the key solutions provided in the draft include:

1. Introduction in 2023 of a maximum price for gas fuels at approx. 200 PLN/MWh and freezing the distribution fee rates. The maximum price will apply to all consumers currently under tariff protection, namely:

• households,
• housing communities and cooperatives, as well as other entities producing local heat for households in cooperatives;
• entities providing essential services to society, including healthcare units, social welfare institutions, education and higher education institutions, nurseries, churches, and non-governmental organisations.

The principle of the frozen tariff will apply to everyone, regardless of income threshold. The price of natural gas in the currently valid tariffs is approx. 200 PLN/MWh. Maintaining this price in 2023 is intended to ensure that gas cost increases for consumers do not exceed this year’s prices.

2. For the most vulnerable gas fuel consumers using gas for heating purposes, an additional refund of the incurred VAT costs will be granted. The VAT refund will apply to those heating with gas who meet the income criteria for the protection allowance (2,100 PLN for a single-person household and 1,500 PLN per person in multi-person households). The equivalent VAT amount will be refunded based on an invoice.

In exchange for maintaining gas prices for consumers at the maximum price level, energy companies are to receive compensation.
Offer: Legal advisor tax law

The deadline for submitting coal allowance applications is 30 November

Let us remind you that the coal allowance of 3,000 PLN is granted to households whose main heating source is:

• solid fuel boiler,
• fireplace,
• wood stove (koza),
• air heater,
• stove,
• kitchen stove,
• coal stove, or
• tiled stove using solid fuel

— fuelled with hard coal, briquettes, or pellets containing at least 85% hard coal.
The allowance has no income criteria. It is a one-time payment credited to the applicant’s account within two months, no later than 30 December 2022. Detailed information is available on the government website.

Is compensation considered income? The issue of including expenses related to car usage as tax-deductible costs and deducting VAT on this account causes entrepreneurs many formalities. Generally, it requires keeping a vehicle mileage log, registering the car with the tax office, and — if the driver wants to deduct a larger part of the expenses — recording it as a fixed asset of the company. Despite fulfilling many obligations, in case of a collision, the entrepreneur’s situation regarding compensation is unfavourable. This is due to the longstanding position of the tax authorities, according to which the amount received as compensation constitutes income in its entirety. Meanwhile, according to the provisions of the PIT Act, tax-deductible costs related to this compensation often reduce only part of the income or may not arise at all.

Compensation for car repairs – tax authority’s position in practice

In an individual interpretation dated 23.09.2019 (ref. no. 0114-KDIP3-2.4011.432.2019.2.A), the Director of the National Tax Information confirmed that even when only part of the repair expenses can be classified as tax-deductible costs (for a car used both for business and private purposes, this is 20% or 75% respectively — if the car is a fixed asset in the company), the entire amount of compensation received constitutes income.
In the case at hand, the taxpayer ran a sole proprietorship. He owned a car used for business purposes and recorded as a fixed asset of the company. In June 2019, the taxpayer was involved in a traffic collision through no fault of his own. The car was damaged. The taxpayer received compensation from the third party’s liability insurance (OC). The car was repaired at his own expense. The taxpayer did not have comprehensive (AC) insurance.

The entrepreneur argued that the compensation amount should not be subject to personal income tax. The tax authority disagreed.

No tax-deductible costs

The Director of the National Tax Information stated that compensation paid by the insurer for damage to assets related to the taxpayer’s business activity constitutes income from business activity as per Article 14(2)(12) of the Personal Income Tax Act. This compensation is related to assets connected with business activity and is not exempt from personal income tax.
This means that in the case described in the individual interpretation, if the taxpayer received compensation of PLN 30,000, the entire amount would be considered income. That is not the end of the bad news, because the taxpayer did not have voluntary comprehensive (AC) insurance. According to Article 23(1)(48) of the PIT Act, expenses incurred due to loss or liquidation of cars and post-accident repairs of cars not covered by voluntary insurance (AC) cannot be included as tax-deductible costs. Therefore, tax must be paid on the full PLN 30,000.

Compensation income exceeds deductible costs

Suppose, however, that the entrepreneur purchased AC insurance. Would the compensation then constitute income? And what about tax-deductible costs? According to Article 23(1)(46a) of the PIT Act, if a car is used for mixed purposes — both business and private — only 75% of repair costs can be recognised as tax-deductible expenses. This means that even with voluntary insurance, deductible costs would amount to PLN 22,500, and the entrepreneur would have to pay tax (and health contributions) on the remaining income.
Only when the car is used exclusively for business purposes and the taxpayer is entitled to deduct 100% of operating expenses from the tax base, do the tax costs “offset” the entire amount of compensation received. Consequently, if an entrepreneur uses the car solely for business and holds voluntary comprehensive insurance, no taxable income arises from compensation received for car repairs.

If you have any doubts about settling tax-deductible costs related to company car use, correct classification of insurance benefits, or need legal advice on other tax matters, please visit our tax law services and contact the ATL Law firm team.