July 7, 2020
Polandís implementation of EU ATAD 2 anti-hybrid measures enters into force from 1 January 2021
From 1 January 2021, Polish regulations implementing the European Union (EU) Anti-Tax Avoidance Directive – ATAD 21 will enter into force. The purpose of the regulations is to prevent the exploitation of hybrid mismatches. Specifically, the regulations provide for non-deductibility of payments giving rise to a:
Also, the regulations deny tax deductibility for payments that, directly or indirectly, finance expenses resulting in the hybrid mismatch, if the transaction is made between associated enterprises or under the so-called structured arrangement. This could be understood as a rule limiting the deductibility of payments made by the Polish company if the hybrid mismatch is exploited at the level of entities higher in the group’s structure or through a payment chain.
The following hybrid mismatch arrangements are addressed by the Polish implementing regulations:
In practice, the new regulations may be of interest (among others) for:
The Polish implementation of the EU ATAD II constitutes an additional limitation on deductibility of costs that should be analyzed along with the others, such as EBITDA2-based limits on costs of financing and costs of services provided by related parties or maximum thresholds for tax deductible debt-leverage costs set by maximum debt capacity transfer pricing regulations. Taking into consideration the complexity of regulations, lack of history of similar regulations in Poland and the potential broad impact, international groups should thoroughly analyze during 2020 whether the new regulation influences their tax position in Poland.
1. Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards discrepancies in the qualifications of hybrid structures regarding third countries.
2. EBITDA: Earnings before interest, taxes, depreciation and amortization.
For additional information with respect to this Alert, please contact the following:
EY Doradztwo Podatkowe Krupa sp. k., Warsaw
EY Doradztwo Podatkowe Krupa sp. k., Wroclaw
Ernst & Young LLP (United States), Polish Tax Desk, New York