Lifting the state of epidemic – results on financial entities | Hogan Lovells

Lifting the state of epidemic, and the recording and reporting of obligations with respect to accounting

Despite the replacement of the state of epidemic in Poland with the state of epidemic emergency, the solutions concerning the recording and reporting of obligations for economic entities remain valid. This includes, among other things, the extension of the reporting dates for 2021.

It should be pointed out that the Act of 14 October 2021 amending the Accounting Act introduced the possibility for financial statements and the report on an entity’s activities to be signed by at least one person who is a member of a multi-member body managing said entity, provided that the other members make a statement that the financial statements have met the requirements stipulated in the Accounting Act of 29 September 1994. In connection with the amendment in question, the legislator decided to set a new deadline by which the statements, should be transferred to the Financial Documents Repository system. In the case of statements approved before 1 June 2022, the documents should be transferred to the KRS (National Court Register) between 1 June and 15 June 2022. On the other hand, for reports approved after 1 June 2022, these documents should be submitted to the KRS within the existing deadline of 15 days from the date of approval.

Another change with respect to the recording and reporting of obligations results from the Regulation of the Minister of Finance of 7 March 2022, amending the Ordinance on determining other deadlines for fulfilling obligations with respect to recording and with respect to preparing, approving, making available, and submitting to the competent register, entity, or authority, any such reports or information. The regulation in question extended certain record-keeping and reporting deadlines for 2021. With this in mind, it should be pointed out that the deadline for preparing the annual financial statements and the deadline for approving the annual financial statements have been extended by three months compared to the standard deadlines for economic entities (commercial law companies, among others) and by one month for public finance sector entities which have the status of a legal entity. The amendments apply to obligations relating to the fiscal year ending after 29 September 2021, but no later than 30 April 2022 which due date has not expired before 31 March 2022.

Therefore, the change from the state of epidemic to the state of epidemic emergency has not affected the timing changes indicated above for the recording and reporting of obligations in 2021.

Lifting the state of epidemic from the Labour Law perspective

The cancellation of the epidemic state and the introduction of the epidemic emergency state has not resulted in any significant consequences in terms of the labour law. Indeed, most of the regulations stipulate that the duration of the COVID-19 regulations will extend to both the epidemic state and the epidemic emergency state, and in certain cases even for a period of three months after their revocation. Below we identify the key HR issues on which special regulations have been introduced in relation to the COVID-19 outbreak.

Possibility to order remote working

During the period of an epidemic emergency, employers are still entitled to order employees to work remotely on the basis of the Act of 2 March 2020 on special arrangements for preventing, counteracting, and combating COVID-19, other infectious diseases, and emergencies caused by them (the “COVID-19 Act“). The order can be issued during the period of an epidemic emergency, as well as for up to three months after its revocation. The order is temporary in nature and can be revoked at any time.

Holiday leave

During an epidemic emergency, an employer can grant an employee with an accrued annual holiday leave of up to 30 days, regardless of whether the employee consents. The time limit of the leave can be imposed by the employer, also bypassing the current holiday leave schedule.

Introduction of remote working into the Labour Code

Work on amending the Labour Code and replacing telework with remote working is still in progress. The latest working draft shows that the provisions concerning remote working would come into force three months after the cancellation of the epidemic state on 16 May 2022. This would mean that the new remote working provisions should take effect from 17 August 2022. Given that the draft amendment has not yet reached the Polish Parliament, this seems unlikely.

Occupational health and safety training

During an epidemic emergency, an employer is still entitled to conduct initial training on occupational health and safety in its entirety via electronic means of communication, with the exception of instructional training for specific groups of employees, including employees in a worker’s position, or in a position which involves exposure to hazardous factors. In addition, the extension of the deadline for periodic training remains in force up to the 60th day from the day of cancellation of an epidemic emergency state, in the event that an epidemic state has not been declared.

Occupational examinations

The performance of periodic medical examinations remains suspended, as well as the issuance of referrals for periodic examinations by the employer. This means that the validity of medical certificates that have been issued as part of initial, periodic, or follow-up examinations, if their original expiry date was after 7 March 2020, have been extended to 180 days after the cancellation of the epidemic emergency state, in the event that the state of epidemic has not been declared.

In addition, if an occupational physician is unavailable, the initial or follow-up examination can be carried out by a physician of another specialty. The medical certificate issued in this manner will be valid temporarily, also for a period of 180 days from the cancellation of the epidemic emergency state, in the event that the state of epidemic has not been declared.

Effect of the presumption of service

The effect of the presumption of the delivery of unclaimed letters sent through the postal operator remains suspended. This is particularly important in the case of the termination of an employment contract (with, or without notice). If the employer sent their employee a notice of their termination of employment by registered letter with an acknowledgement of receipt, and this letter was not collected by the employee despite proper notification as to the date and the possibility of collecting it, the employer’s notice cannot be deemed delivered. During an epidemic emergency state and also for 14 days after the state of emergency has been lifted, there is no effect of the presumption of delivery. This means, for instance, that during the period of the epidemic emergency state, despite a notice of termination having been sent to the employee, the employment contract will not be effectively terminated if the employee does not receive the delivery.

Extension of the period of legal stay and the performance of work by a foreigner

During an epidemic emergency state, the deadline for submitting applications for residency permits for foreigners is extended until the expiry of 30 days from the end of the epidemic emergency state. Similarly, the legality of a foreigner’s stay in Poland, who has been staying in the territory of the Republic of Poland on the basis of, among other things, a Schengen visa or under the visa-free regime, is extended. During this period, foreigners, whose legal stay was prolonged due to a previous epidemic state and an ongoing state of epidemic emergency, are entitled to work until 30 days after the state of epidemic emergency has been cancelled. Up until that date, there will also be exceptions from the obligation for a foreigner to have a work permit introduced by the COVID-19 Act with respect to seasonal work and work performed on the basis of a statement on the commission of work entered in the register of statements.

The term of office for trade union bodies and social labour inspectors

Under the amendment to the COVID-19 Act made in August 2021, the term of office for the statutory bodies of trade unions, unions, or organisations of entrepreneurs, as well as social labour inspectors, was extended. According to the current wording of the legislation, if the term of office of the aforementioned bodies expires during the epidemic emergency state or 30 days after its cancellation and it is not possible to hold elections due to the emergency, the term of office is extended until a new body has been elected, but no longer than 90 days from the date of the epidemic emergency state being cancelled.

Days off in lieu of blood donation

Honorary blood donors who donate blood or blood components (including plasma after undergoing COVID-19) during the applicable epidemic emergency state will be entitled to days off from official duties on the day on which they donated blood, as well as on the following day.

Lifting the state of epidemic – tax implications

Lifting the state of epidemic and its replacement by the epidemic emergency state has meant that a significant number of the preferences provided for in the tax legislation ceased to apply at the end of May, and only selected ones will remain in force until the end of 2022.

Tax on buildings

As part of the COVID-19 legislation, an exemption from the tax on income from buildings was introduced. However, said exemption ceased to apply at the end of May. Therefore, as of 1 June 2022, owners of commercial properties with a value exceeding PLN 10 million (if the property is rented, leased, or let for use on the basis of some other agreement of a similar nature) are required to account for the tax on income from buildings.

One-time depreciation of fixed assets

Under the COVID-19 regulations, a preference was introduced to allow a one-time depreciation on fixed assets acquired for the purpose of the production of goods related to the prevention of COVID-19.

In view of the state of epidemic being lifted, the final month for which this write-off could have been made was May 2022.

Donations for the purpose of counteracting COVID-19

As a result of the COVID-19 regulations, PIT and CIT taxpayers could deduct 150% or even 200% of the value of donations from their income which were made to selected institutions or public benefit organisations for the purpose of counteracting COVID-19. The deduction could also be made by taxpayers who decided to donate computer equipment to educational institutions.

As a result of the lifting of the state of epidemic, the final month to benefit from the preferential rules for accounting for these donations was May 2022.

Bad debt relief

The COVID-19 regulations introduced regulations that significantly modified the rules for applying bad debt relief.

The first of the preferences related to debtors. As a rule, a debtor who has not paid a monetary benefit is obliged to increase the tax assessment basis or reduce the loss incurred by the value of the unpaid receivable. Resulting from the COVID-19 regulations, a debtor who has not paid their receivables on time is not obliged to increase the tax assessment basis or reduce the loss incurred, provided that:

  • there was an epidemic state declared due to COVID-19 in the relevant year,
  • the debtor had revenues 50% lower than the revenues generated in the corresponding period of the previous tax year,
  • the debtor suffered adverse economic consequences because of COVID-19.

The second preference covered creditors who had not received payment. As a rule, these creditors could reduce their tax assessment basis or increase their tax loss if they had not received payment within 90 days of the due date indicated on the invoice or contract. However, the COVID-19 regulations have modified this rule and on the basis of which, a reduction of the tax assessment basis can already be carried out after the lapse of 30 days from the payment deadline.

The aforementioned preferences are valid until the end of the year in which the state of epidemic was cancelled, i.e. until the end of December 2022.

PIT exemption limits

Until the end of 2022, increased limits for certain PIT exemptions also apply:

  • up to PLN 3,000 – for allowance aids (other than those listed in Article 21(1)(26) of the Personal Income Tax Act of 26 July 1991) paid to employees who belong to a company or inter-company trade union organisation from the funds of that organisation,
  • up to PLN 10,000 – for allowance aids paid as a result of individual random events, natural disasters, long-term illness, or death,
  • up to PLN 2,000 – for the value of benefits in kind received by an employee in relation to the financing of social activities referred to in the provisions of the ZFŚS (Social Benefits Fund), financed entirely from ZFŚS or trade union funds,
  • up to PLN 3,000 – for additional holiday allowances for children and young people under the age of 18 from the employer’s working capital funds.

As a rule, it is only possible to take advantage of the IP BOX relief in the annual return. However, the COVID-19 regulations entitled certain PIT and CIT taxpayers to apply the preferential 5 per cent PIT/CIT rate for the taxation of income from qualified intellectual property rights at the stage of making advance tax payments. This additional preference was granted to taxpayers who undertake COVID-19 counteraction work.

The cancellation of the state of epidemic resulted in CIT taxpayers being able to use the described preference only until 31 May 2022. For PIT taxpayers, the deadline for taking advantage of this is longer and will expire on 31 December 2022.

R&D relief

During the epidemic state, PIT and CIT taxpayers who incurred qualified R&D costs to develop products necessary to counter COVID-19 could settle these costs at the stage of making advance tax payments – and not only in the annual return.

As a result of to the cancellation of the state of epidemic, May 2022 was the final month for this additional preference. Currently, both PIT and CIT taxpayers must wait for their settlement of qualified R&D costs until the submission of their annual return.

Certain preferences remain unchanged

It is also worth noting that there are a number of preferences that remain unchanged despite the state of epidemics being cancelled and its replacement with a state of epidemic emergency. These preferences include:

  • the suspension of deadlines for reporting domestic tax schemes,
  • the possibility of using copies of certificates of residence,
  • the possibility of using a residence certificate which 12-month “validity” expired during the state of epidemic or the state of epidemic emergency,
  • extended a 14-day deadline for submitting a notice of payment to an account outside the so-called Whitelist of VAT Taxpayers (ZAW-NR),
  • no prolongation fee for payments in instalments, or a deferment of the deadline for the payment of taxes or tax arrears,
  • the possibility to treat contractual penalties and compensations paid by an entrepreneur as tax deductible costs for defects in delivered goods, performed works and services, as well as for a delay in the delivery of goods free of defects, or for a delay in the removal of defects in goods, or performed works and services, if said defects or delays were caused by the state of epidemic or the state of epidemic COVID-19 emergency,
  • transfer pricing simplifications.

Unfortunately, while the state of epidemic emergency is in force, the extended six-month waiting period for the issuance of an individual ruling of tax law provisions is also still in force.

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