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Estonian CIT and residential estates
2024-09-18 16:36

Estonian CIT and residential property depreciation

The flat tax on corporate income, commonly known as Estonian CIT, is gaining increasing popularity. This is partly due to favorable tax rates, but also to several benefits that only companies taxed under this regime can enjoy. This also applies to real estate, which I will discuss today.

What is Estonian CIT?

The flat-rate tax on corporate income is a special taxation model for legal entities, whereby a company pays tax only when it disposes of its profits, rather than periodically as in traditional corporate income tax. In a nutshell, tax is due when the profit generated by the company is distributed to the shareholder. The Corporate Income Tax Act provides for many situations that are considered profit distributions, and particularly interesting are hidden profits, which are worth discussing in a separate article.

Additionally, companies subject to the Estonian regime keep only financial accounting, without tax accounting. All CIT-related events are determined based on accounting regulations. And it is this aspect of the flat tax on corporate income that contributes to favorable tax results around real estates. It concerns the possibility of depreciating residential premises.

Depreciation of residential properties

Depreciation is a gradual decrease in the value of fixed assets, reflected in monthly depreciation charges, which are costs of operation.

The amendment to the income tax acts in 2021 (the so-called Polish Deal) closed the possibility of depreciating residential premises. Pursuant to Article 16c(2a) of the Corporate Income Tax Act, as of January 1, 2023, corporate income taxpayers cannot include in their tax-deductible expenses depreciation charges for:

  • residential buildings,
  • residential premises constituting separate real estate,
  • cooperative ownership rights to a residential premises, and
  • the right to a single-family house in a housing cooperative.

Therefore, CIT payers (and also PIT payers) can no longer reduce their income by monthly depreciation of residential properties. Residential properties still constitute fixed assets, however, depreciation charges are not taken into account when calculating income as costs.

Estonian CIT as a remedy

However, under accounting regulations, depreciation charges for residential properties continue to reduce the financial result. The Accounting Act has not introduced similar changes to the depreciation of fixed assets as in the Corporate Income Tax Act. And companies taxed under the Estonian CIT determine their tax base in accordance with accounting regulations, not tax regulations, and therefore are not subject to the newly added Article 16c(2) of the Corporate Income Tax Act.

The above reasoning is confirmed by the interpretation of the Ministry of Finance dated April 12, 2023.

Summary

Estonian CIT is an excellent tool to use in activities related to the residential real estate market. For example, development companies can take advantage of this opportunity at the completion stage of their investments.

If you are interested in implementing Estonian CIT in your company or are already settling under the flat tax on corporate income and have questions, please contact us. Our tax advisor will be happy to answer your questions.

 

Whistleblowers and Internal Reporting Procedures
2024-09-05 09:52

Whistleblower and Internal Reporting procedure

Whistleblowers and Internal Reporting Procedures

Since the introduction of Directive 2019/1937 on the protection of persons reporting breaches of Union law, commonly known as the Whistleblower Directive, businesses across Europe have been required to implement appropriate procedures and systems allowing employees and other persons associated with the company to report irregularities. In Poland, these provisions have been implemented through the new Whistleblower Protection Act. In this article, we will explain who whistleblowers are, the obligations of companies, how to implement an effective internal reporting procedure, and the deadlines and legal consequences of non-compliance with these regulations.

Who is a Whistleblower?

A whistleblower is a person who reports breaches of law, ethical principles, or other irregularities that have occurred within an organization with which they are associated, such as an employee, contractor, collaborator, intern, or a person providing services under civil law contracts.

Examples of irregularities reported by whistleblowers may include:

  • Labor law violations, such as discrimination, bullying, or failure to respect workers’ rights,
  • Financial fraud, e.g., accounting manipulations, money laundering, tax evasion,
  • Breaches of environmental protection regulations,
  • Health and safety violations,
  • Breaches of data protection and privacy laws.

Who is Affected by Whistleblower Protection Regulations?

The Whistleblower Directive covers a broad range of entities that are required to implement whistleblower protection procedures. In Poland, these regulations have been implemented through the Whistleblower Protection Act, which will come into effect on September 25, 2024. According to this Act, the following entities are required to implement reporting procedures:

  • Private companies employing at least 50 persons performing remunerated work on their behalf (calculated as full-time equivalents) or persons providing work for remuneration based on a contract other than an employment relationship,
  • Public sector entities, including local governments and public institutions,
  • Companies in specific sectors, such as those operating in financial services, products, and markets, anti-money laundering and counter-terrorism financing, transport safety, and environmental protection, regardless of the number of employees.

What Are the Obligations of Employers in Poland?

According to the Whistleblower Protection Act, employers are required to implement mechanisms for reporting irregularities and protecting whistleblowers. Key obligations include:

  • Implementing an internal reporting procedure,
  • Ensuring the protection of the whistleblower’s identity,
  • Prohibiting retaliatory actions,
  • Meeting deadlines for acknowledging receipt of the report and providing feedback.

How to Implement an Effective Internal Reporting System?

Implementing an internal reporting procedure requires proper planning. Key aspects include:

  • Secure communication channels,
  • An independent unit handling reports,
  • Monitoring and updating procedures,
  • Education and fostering a reporting culture within the company.

What Are the Consequences of Non-Compliance with the Whistleblower Protection Act?

Failure to comply with the obligation to implement whistleblower protection procedures under the Polish Whistleblower Protection Act may result in consequences, including:

  • Fines imposed on entities for failing to implement appropriate procedures,
  • Risk of reputational damage – failure to protect whistleblowers may lead to public disclosure of irregularities in the media, negatively impacting the company’s image.

Summary

Regulations concerning whistleblower protection, both at the EU and Polish levels, represent an important step towards increasing organizational transparency and accountability. Implementing internal reporting procedures not only protects companies from legal sanctions but also fosters a culture of trust and ethical conduct.

Our law firm offers support in helping organizations comply with new legal requirements, developing appropriate procedures, and training employees on whistleblower protection.

Contact

If you need legal assistance, contact our office at the phone number:

If you need legal assistance, contact our office at the phone number:
+48 690 009 732

Email us:
info@walawski.com

You can also message us on Facebook:
Our Facebook Profile

 

Debt collection from a contractor – how to recover your money?
2024-08-20 08:51

Debt Collection from a Contractor

Debt Collection from a Contractor – How to Recover Your Money?

Whether you run a business or not, you may at some point face the challenge of debt collection. Unpaid invoices, payment delays, or a debtor avoiding contact can seriously disrupt cash flow—even for a company. What should you do when a contractor doesn’t pay? How can you effectively assert your rights? Here’s a guide that will help you understand the debt collection process and outline the steps you should take.

What is a Debt?

A debt is the right to demand that the debtor fulfill a specific obligation. Most often, payment for goods or services. A debt may also involve the repayment of a loan, payment for services rendered, or another type of financial obligation arising from an agreement between the parties. When your contractor is overdue on payments, you have the right to pursue the owed money. Although this process may seem complicated, it is essential for maintaining financial stability. That’s why it is so important to act in an organized and thoughtful manner.

What Are the First Steps in Debt Collection?

Reminder and Contact with the Debtor

The first step you should take is to contact the debtor. Payment delays are often due to oversight or temporary financial difficulties. It’s worth starting by sending a reminder about the overdue payment—this can be an email or SMS. It’s crucial that contact with the debtor is documented. If you use email, save all messages you send and any responses you receive. This could be important if the matter goes to court.

Payment Demand Notice

If the reminder doesn’t work, the next step is to send a formal payment demand notice. This document should include detailed information regarding the amount owed, the payment deadline, and possible legal consequences if the delay continues. A payment demand notice is an important step that shows the debtor you are serious about the matter. A well-prepared demand can take the form of a registered letter, giving it an official character. It’s advisable to specify a final payment deadline in the document.

Negotiations with the Debtor

It’s also worth considering negotiating with the debtor. Sometimes, the debtor may agree to pay the debt in installments or agree to other terms that are favorable to both parties. This approach is particularly beneficial if you want to maintain good business relations with a contractor who has fallen into financial difficulties for various reasons. Remember to formalize any agreements reached in a contract.

What to Do if the Debtor Avoids Payment?

If the debtor continues to avoid payment despite reminders and demands, it may be necessary to take more decisive action. As a law firm, we strive to get the most out of each case at the pre-litigation stage. Taking a case to court is our last resort. However, if there is no response to attempts to amicably resolve the disputed issues, or if the debtor fails to pay as agreed, the creditor should consider filing a lawsuit.

Going to Court

If none of the previous actions have worked, you can file a lawsuit in court. Legal proceedings in payment cases can take time, though they don’t always have to. Depending on the value of the claim and the evidence you have in the case, proceedings can be conducted in different “modes.” If you have a document showing the debtor’s acknowledgment of the debt, you can apply for a payment order in summary proceedings. If you do not file such an application, the case will be heard in a writ-of-payment mode. Most payment cases—if the evidence submitted with the lawsuit allows it—end with a payment order being issued without a hearing.

Enforcement by a Bailiff

After obtaining a final judgment—whether it’s a payment order or a court judgment—you can apply for the enforcement clause to be attached to the enforceable title. After serving the enforceable title, you can request a bailiff to initiate and carry out enforcement proceedings. The bailiff, depending on the content of your application, has the right to seize the debtor’s assets, including bank accounts, movable property, and even real estate, to satisfy the debt. The enforcement process by a bailiff is usually the final stage in debt collection, but its effectiveness often depends on whether the debtor has sufficient assets to satisfy the claims. The bailiff can also auction seized movable or immovable property, allowing for the funds needed to pay off the debt to be raised.

Is It Worth Using the Services of a Law Firm? Debt Collection in Szczecin.

Law firms specializing in debt collection can significantly speed up the entire process. Working with professionals ensures that all steps are taken in accordance with the law, and the debtor has no grounds for defense. A legal advisor can help draft a payment demand notice, prepare a lawsuit, and represent you in court. Additionally, the law firm can negotiate with the debtor, which often leads to a quicker and more favorable resolution of the case. It’s worth noting that in the lawsuit, you can claim the reimbursement of legal costs from the debtor if the court rules in your favor.

Summary – How to Effectively Assert Your Rights?

Debt collection in Szczecin can be divided into several stages. However, the key is to act quickly and decisively. The longer you wait, the harder it may be to recover your money, and the debt may become more difficult to collect. Every situation is different, so not every method will be effective in all cases. It’s always worth carefully analyzing the situation and choosing the strategy that best suits your needs.

If you still have doubts after reading this article, contact us. Our team of lawyers will help you outline a plan of action to recover your dues and provide support at every stage of the proceedings. We’ll discuss your situation and help you find the best solution.

Contact Us

If you need legal assistance, contact our law firm at +48 690 009 732

Write us an email: info@walawski.com

You can also message us on Facebook: Our Facebook Profile

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We invite you to read our latest article, where we answer the most frequently asked questions in conversations with clients – “What is the difference between an advocate and legal counsel?”. “Can a legal counsel appear in court?”. You can find the link to the article here.