Report on income tax information. New reporting obligation for large entities.

On April 16, the President signed an amendment to the Law on Accounting and certain other laws, which introduces an obligation to prepare and publish a report on income tax information.

This is an implementation of Directive 2021/2101, which requires large multinationals doing business in the European Union to disclose information on income tax paid on a country-by-country basis.

Entities required to report

The report on income tax information will apply, subject to certain conditions:

• top-level parent entities, if the revenues included in the annual consolidated financial statements of that entity exceed for each of the last two fiscal years the amount of PLN 3.5 billion, or
• independent units, if the revenues included in the annual financial statements of this unit exceed for each of the last two fiscal years the amount of PLN 3.5 billion.

An independent entity is understood to be an entity that is not part of a capital group.

In addition, the new regulations apply to:

• subsidiaries of the size specified in the law, controlled by non-EEA ultimate parent entities, whose revenues for each of the last 2 fiscal years exceed the amount of 750 million EUR,
• branches that for each of the last 2 fiscal years exceed the amount of revenues of 51 million PLN formed by non-EEA entities whose revenues for each of the last 2 fiscal years exceed the amount of 750 million EUR.

The new obligation applies only to entities that are corporations, joint-stock corporations, or general or limited partnerships, all of whose partners with unlimited liability are corporations, joint-stock limited partnerships, or foreign companies with a similar legal form to these companies.

The law provides for two subject exemptions to the obligation to prepare the above report. Basically, the new provisions do not apply when:

• the ultimate parent company and all of its subsidiaries and their branches, or the stand-alone company and its branches have their registered office or permanent place of business exclusively in the territory of the Republic of Poland, or
• the ultimate parent entity or the stand-alone entity operates under the Banking Law and discloses additional information in the statement of operations.

Entities cease to be subject to the obligation to prepare a report on income tax information if the revenues earned are less than the indicated thresholds for each of the last 2 fiscal years.

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Scope of new reporting obligations

The new regulations expand the responsibilities of the entity’s manager (as a rule, the board of directors), who will be required to:

• prepare a report on income tax information,
• make the report public on the entity’s website (for at least 5 years),
• its submission to the National Court Register.

The regulations are to apply for the first time to the report on income tax information for the fiscal year beginning after June 21, 2024.

The income tax report shall be prepared in electronic form and shall bear a qualified electronic signature, a trusted signature or a personal signature, except that this report shall not be signed by the person entrusted with keeping the books of account.

In order to publish and make available the income tax report, the head of the entity within 12 months from the balance sheet date:

• file the report on income tax information with the competent court registry, and
• post the report on the entity’s website, with the report being made available on the website for at least 5 years.

In the event that the ultimate parent or stand-alone entity does not provide an report on income tax information, the subsidiary or branch shall prepare, publish and make available:

• an report on income tax information containing the information it has, obtained or acquired, and
• a statement stating that the ultimate parent company or the stand-alone entity, respectively, has not made available the income tax report or the information necessary for its preparation.

Scope of the report on income tax information

The report on income tax information is prepared as of the balance sheet date and includes information on all activities of either the stand-alone entity or the ultimate parent, including the activities of all subsidiaries included in the consolidated financial statements of the ultimate parent, for the fiscal year.

This report contains, among other things, the following information:

• the name of the ultimate parent or stand-alone entity and a list of specified subsidiaries,
• the fiscal year,
• the presentation currency of the income tax report,
• a brief description of the nature of the entities’ operations,
• number of full-time equivalent employees,
• income, including from transactions with related parties, determined according to a specific methodology,
• the amount of profit or loss before taxes,
• the amount of income tax payable in the fiscal year, which represents the current tax burden on taxable profits or losses in the fiscal year recognized by units and branches in the tax jurisdiction, without taking into account deferred tax and provisions for contingent tax liabilities,
• the amount of income tax paid in the fiscal year by units and branches in the tax jurisdiction, including the amount of withholding tax paid by other units with respect to payments to units and branches within the group,
• the amount of retained earnings at the end of a given fiscal year, including the amount of profit from previous fiscal years and the amount of profit from a given fiscal year for which a decision on distribution has not been made, whereby in the case of branches, retained earnings means the retained earnings of the entity that established the branch.

The income tax report is prepared in Polish language and in Polish currency.

Information in the income tax report is presented separately for:

• each country belonging to the European Economic Area,
• each tax jurisdiction that, as of March 1 of the fiscal year for which the income tax report is to be prepared, is considered a tax haven according to the EU,
• other tax jurisdictions – in aggregate form.

The information in the income tax report is presented for each tax jurisdiction in which the activities of either the group or the stand-alone entity may be subject to income tax, on the basis of registered office, permanent place of business or regular business activities.

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