Thin capitalisation – application and limitations under Polish tax law and EU Council Directive 2016/1164 (ATA Directive)

Abstract

Objective: This article aims to present the phenomenon of thin capitalisation as well as to analyse its essence and application. The considerations are based on the historical and current Polish legislation, taking into account the impact of EU law, which makes it possible to compare various regulatory solutions in terms of thin capitalisation. Research Design & Methods: The considerations made in this article are based on both repealed and current provisions of the Act of 15 February 1992 on corporate income tax in the scope of thin capitalisation. Due to the need to implement EU Council Directive 2016/1164 of 12 July 2016 (ATA Directive) into the Polish legal system, its content has also been analysed. Findings: Changes in the scope of thin capitalisation introduced by the implemented ATA Directive should be considered favourable for the legal system. The current regulations govern thin capitalisation in a much clearer and less manipulable way than the previous solutions. In addition, they appropriately balance the interests of both the state and taxpayers. Implications / Recommendations: The EU-wide changes resulting from the provisions of the ATA Directive and previously also from the OECD actions under the BEPS Action Plan should have the intended effect of eliminating at least some of the aggressive tax optimisation activities without significantly affecting the interests of taxpayers. Contribution / Value Added: The article presents a comparative analysis of previous and current thin capitalisation solutions, which allowed the evaluation of regulations introduced by the Polish legislator as well as EU solutions.