e of the voting power of the Polish company .taxes / Taxes on income and , in most cases , value-added tax ( VAT) are not deductible . However , VAT is deductible for corporate income tax purposes if it cannot be offset against the company's output VAT.
Other taxes that are part of expenses are deductible in full .
Business expenses / Businesses are entitled to deduct from their revenues costs borne in order to attain revenue related to the fiscal period for which the deductions are made. The law provides a list of items of expenditure that are not tax deductible . The list contains some 60 items , including the following .
1. Costs of assets subject to depreciation.
2. Written-off lapsed accounts receivable.
3. Expenditure borne on abandoned investments.
4. Unrealized foreign exchange losses.
5. Nonpublic advertising costs in excess of 0.25% of turnover.
6. Accrued but unpaid interest .
7. Accounting and comparable provisions .
8. Tax penalties and penalty interest .
GROUP TAXATION
Companies wanting to use group taxation must conclude an agreement in the form of a notarized deed forming a capital tax group for a period of at least three years . Only limited liability and joint stock companies having a seat in Poland may participate in the group . The dominant company must hold directly 100% of the shares of the dependent companies . There are some additional restrictions and requirements regarding shareholding among the companies , including minimum share
capital and minimum group profitability of at least 8% (understood as the ratio of taxable income to taxable revenue ).
TAX INCENTIVES
Investment deductions / Investment relief is available to companies performing business activities in Poland in the form of a deduction of qualifying investment expenditures from pretax profits for corporate income tax purposes income tax purposes . To qualify for investment deductions a taxpayer must meet , among others , the following conditions .
1. Ratio of net income to gross revenue must exceed 8% in the year preceding the tax year in which the deductions are taken ( 4% for activities in respect of agriculture and food processing and the rendering of services in connection with housing construction ; 2% for activities in respect of collection and segregation of waste materials).
2. The company has no overdue liabilities to the state exceeding 3% of the tax due or , such liabilities having been disclosed , the company pays them together with penalty interest within 14 days from the date of disclosure .
3. Expenditures must be supported by appropriate documentation.
The investment deduction is generally limited to 10% of the company's taxable income in the year in which the investment is made .However ,the above requirements need not be met if ,in the year of investment ,the proportion of revenue from exports exceeds 50% of the total revenue ,or revenue from exports exceeds the equivalent of d8 million .The taxpayer may then deduct investment expenditures of up to 30%(25% as of January 1,2000) of this income from taxable income .The relief in effect gives rise to accelerated tax allowances for depreciation.Examples of qualifying investment expenditures include the following.
1. Purchase and assembly of machinery and equipment.
2. Construction or extension of buildings.
3. Purchase of means of transport , with the exception of passenger cars and small vans .
4. Purchase from the Stare Treasury of an enterprise or an organized part of an enterprise's assets .
If before the commencement of the business activity a taxpayer incurs investment expenditure not lower than the equivalent of∈2 million , it may deduct from taxable income its precommencement investment expenditures in the tax year and the next three following tax years , counting from the end if the year in which activities commenced . As of January 1,1999 this deduction is limited to 10% of the taxable income in each of these years .
With the exception of certain investment expenditures , taxpayers are entitled to an additional reduction (tax bonus
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