Since 2018, new thin capitalisation rules have been present in Poland, as an implementation of the Anti-Tax Avoidance Directive (ATAD) into the Polish tax system. The new rules apply to all borrowing costs, including costs resulting from contracts with unrelated entities. Under the new limitation, net borrowing costs are deductible against income only up to 30% of a taxpayer’s EBITDA. In any case, the net borrowing costs are entirely deductible, provided that they do not exceed EUR 3 million. The notion of debt financing costs should be understood as any costs related to obtaining financial resources and using these resources.
The catalogue of borrowing costs subject to limitation is open and has been extended in comparison to the previous catalogue. Now the catalogue includes a finance cost element of lease payments. Unfortunately the Polish lawmaker did not follow the ATAD to the letter, overlooking making a reference to "finance lease", so that operating lease costs would not be subject to limitation.
The borrowing costs incurred by a taxpayer in a given tax year which the taxpayer was not able to deduct from its income in that year can be carried forward and deducted in the following five tax years.
Our recommendation
Capital groups which have their subsidiaries in Poland should bear in mind whether and to what degree the tax authorities extend the catalogue of borrowing costs, especially with respect to operating lease payments.
