The shield is not enough. Alternative ways to secure the financial result
On the 31st of March 2020, the provisions of the so-called anti-crisis shield were adopted to support entrepreneurs in minimising business losses in connection with the coronavirus pandemic. The government’s proposals are mainly addressed to micro and small companies and are ad hoc solutions, which means they do not meet the long-term needs of business. The main challenges now are to maintain liquidity and to protect jobs. Companies for which the proposals contained in the government’s special law are not sufficient may resort to solutions securing their financial result for this year. These include, among others, verification of costs incurred in the past and recovery of overpayments or tax reliefs.
Many companies are still in the process of reorganisation and are trying to solve the most urgent problems, such as lack of continuity in the supply chain, sales drops, production limitations or staff shortages.
During this hot period, taxpayers expect simplification of procedures, minimisation of formalities and rapid decision-making by public authorities. For entrepreneurs whose liquidity is at risk, time plays a key role. In addition to government support through the anti-crisis shield, they have other solutions at their disposal to help generate savings and improve revenues later this year. The most effective ones are described below.
Not all the PIT or CIT payers are aware that they can file a tax return adjustment at any time to settle the R&D relief up to five years back. This solution is particularly attractive for the fiscal year of 2018, in which the R&D relief became fully effective and from that moment on allows for a 100% deduction of eligible costs.
This opportunity should be used especially by those entrepreneurs who already know the mechanism of the relief, but have only settled it once so far. It is worth revisiting your R&D activities to generate tax savings. Once adjustment is submitted, the entrepreneur will receive a refund of overpaid tax within a few months.
– When looking for savings, it is worth looking at the costs already incurred. If a company carried out research and development activities in previous years, it should check whether the costs incurred by it are eligible for the R&D relief in force from 2016. The most frequently settled eligible costs include personnel costs and the costs of materials and resources. The next step is to prepare a record of these costs and to develop a project fiche for R&D activities. The only difficulty may be to find all the documents and the fact that the process itself may take time. However, the efforts will pay off in the form of savings to secure liquidity this year,” – states Agnieszka Hrynkiewicz-Sudnik, Director of Taxation and Innovation Financing at Ayming Poland.
Deferral of payments and verification of local taxes
As part of the anti-crisis shield, municipalities were granted special powers in the area of property tax. Local legislators may introduce exemptions from fees for part of 2020. The municipal council is also entitled to extend the deadline for the payment of property tax instalments for April, May and June until the 20th of September this year at the latest. It is the responsibility of the municipalities to develop the rules on the basis of which taxpayers will be able to benefit from this preference. The legislature merely indicated that the exemption could be granted to entrepreneurs ‘whose liquidity has deteriorated due to the negative economic effects of COVID-19’.
– Local tax payers can take advantage of the additional opportunity to generate savings, which is provided by verification of the correctness of settlements with the municipality. According to the provisions of the General Tax Law, they have the right to file an adjustment of the tax return up to 5 years back. Revising the existing fees can bring significant savings. According to Ayming’s analyses, 44% of companies in Poland pay excessive property tax. In the case of the largest entities – i.e. those paying more than PLN 3 million in tax annually – the percentage is as high as 71% – adds Przemysław Smoczyński, Project Manager in the Taxes and Local Charges Department at Ayming Poland.
Verification of social security costs
At the end of March, employers received a notification from the Social Insurance Institution (ZUS) about the rate of interest on the accident contribution in the new settlement period, which will be valid for one year. Every entrepreneur can verify the correctness of its calculation to make sure that the fixed rate is not too high. A frequent reason for overestimation of accident contributions is incorrect data provided in the ZUS IWA information, for example regarding the number of accidents or the number of insured persons. If irregularities are found in the tax return, the payer of contributions should correct ZUS IWA individually within 7 days. You can also check the correctness of calculations of the accident contribution up to 5 years back and recover any overpayments.
– Another way to significantly reduce social security liabilities is to minimise hazardous conditions in the company. The working environment has the greatest impact upon the amount of the accident contribution. The most common factors increasing the contribution include noise, dust, mechanical vibrations, chemicals, radiation and cold or hot microclimate. In a situation where many companies are now using a forced and often limited mode of operation, this is a good time to start designing measures to improve their working conditions. Minimising the risk factors and ensuring proper assessment of the work environment may translate into a reduction in the rate of interest on the accident contribution in the next settlement period, i.e. into measurable savings for the employer – explains Michał Wawrzynowski, H&S expert in the field of Labour Costs at Ayming.
Magdalena Burzyńska, Managing Director at Ayming Poland
Last Updated on March 9, 2021 by Karolina Ampulska