The recent law on the taxation of particular financial institutions popularly known as the banking tax came into operation from the beginning of February.

Although the formal title of the law refers to financial institutions effectively the law is aimed at the banking and insurance sector thus excluding investment funds.

The tax is an asset based monthly tax ensuring full transparency through to accounting records being based directly on the underlying trial balance of the reporting entity.  This therefore requires the bank to consistently adopt the accounting policy month on month throughout the year.  Any retrospective change will therefore result in filing a revised declaration justifying the change to the tax office.  In adopting this basis for the tax the government have effectively increased control over this sector of financial institutions. 

Branches of foreign banks operating in Poland also fall within the scope.  Small banks reporting gross assets less than 4 billion PLN are exempted from the tax which is equivalent to the allowance large banks are permitted to deduct from their cumulative assets. For Banks providing lending services the taxpayer’s own funds and reserves are also deducted in order to protect their interests as depositaries. Other categories of financial institutions subject to the tax have appropriate size classifications and relevant adjustments and thresholds for establishing the taxable base.

The rate of tax applied to the taxable base is 0.0366% per month which is declared and paid by 25th of the following month.

Although the Polish “Bank tax” cannot strictly be associated as a reaction to the 2007-2008 financial crisis it can be assumed to be modelled on mechanisms already adopted in advanced economies imposed to discipline banks. Financial stability contributions or responsibility fees were designed to create funds or curtail and punish risky subprime lending in Western economies.  Most will recall that Poland’s banking system has remained robust during and throughout the aftermath of the financial crisis.  The real reason for the imposition of this tax is to raise funds for the financing of the new Polish governments child benefit initiative “500+” successfully adopted by the Sejm recently.