Capital gains may further tax start of OTC market
The Finance Ministry is expected to decide in early May whether trades on the OTC market should be subject to capital gains tax, according to a Ministry spokeswoman.
Under current regulations, individual Polish investors and foreign investors, both retail and institutional, whose countries have a double tax treaty with Poland, are exempt from the 40% tax for trades on the Warsaw Stock Exchange (WSE). Investment funds based in tax havens lacking tax treaties with Poland are also exempt.
If OTC trading does not enjoy the same privilege, investors would see their returns diminished and might shy away from the still-unborn market.
The taxable status of the market would not likely deter Polish corporations and institutional investors from investing as they are already subject to the capital gains tax when investing in equities or debt on the WSE.
Foreign institutional and individual investors are likely to shy away from the OTC market as disclosure requirements will be less than the WSE, companies will be smaller and there will be greater risk. Polish retail investors are more likely to play the market, but adding in capital gains tax could multiply the risk and drive these investors away.
The over-the-counter market was "forgotten" when the tax laws were created, said Radomir Nowosad, director of the Brokerage House Association (BHA). Nowosad said the association had written to the Finance and Privatization Ministries to try to rectify the situation.
OTC officials would like "the Ministry of Finance (to) make conditions more friendly for this type of trading," Nowosad said. A capital gains tax for OTC trading on the market could be potentially dangerous for the market, he added.
Even if the Finance Ministry does not change the status quo this month, the capital gains question could be sorted out in the tax law changes due to take effect next year, said Joanna Kanicka, manager of the corporate tax department at Ernst & Young.
But "the tax authorities are keen to collect tax wherever possible," she said. Gains made on the OTC market should be considered as normal earnings, she added, and no specific exemptions should be made toward the OTC market.
Officials from the Central Table of Offers (CeTO), the management company for the OTC market, were unavailable for comment about the tax situation at press time.
CeTO officials have previously said they expect the market to be up and running sometime this summer. This, however, is one of numerous postponements, as the company had originally slated a May start, pushed that back to June and have now delayed a launch again.
The delays in starting have added to skepticism about the market and many think that it is not needed.
Under current regulations, individual Polish investors and foreign investors, both retail and institutional, whose countries have a double tax treaty with Poland, are exempt from the 40% tax for trades on the Warsaw Stock Exchange (WSE). Investment funds based in tax havens lacking tax treaties with Poland are also exempt.
If OTC trading does not enjoy the same privilege, investors would see their returns diminished and might shy away from the still-unborn market.
The taxable status of the market would not likely deter Polish corporations and institutional investors from investing as they are already subject to the capital gains tax when investing in equities or debt on the WSE.
Foreign institutional and individual investors are likely to shy away from the OTC market as disclosure requirements will be less than the WSE, companies will be smaller and there will be greater risk. Polish retail investors are more likely to play the market, but adding in capital gains tax could multiply the risk and drive these investors away.
The over-the-counter market was "forgotten" when the tax laws were created, said Radomir Nowosad, director of the Brokerage House Association (BHA). Nowosad said the association had written to the Finance and Privatization Ministries to try to rectify the situation.
OTC officials would like "the Ministry of Finance (to) make conditions more friendly for this type of trading," Nowosad said. A capital gains tax for OTC trading on the market could be potentially dangerous for the market, he added.
Even if the Finance Ministry does not change the status quo this month, the capital gains question could be sorted out in the tax law changes due to take effect next year, said Joanna Kanicka, manager of the corporate tax department at Ernst & Young.
But "the tax authorities are keen to collect tax wherever possible," she said. Gains made on the OTC market should be considered as normal earnings, she added, and no specific exemptions should be made toward the OTC market.
Officials from the Central Table of Offers (CeTO), the management company for the OTC market, were unavailable for comment about the tax situation at press time.
CeTO officials have previously said they expect the market to be up and running sometime this summer. This, however, is one of numerous postponements, as the company had originally slated a May start, pushed that back to June and have now delayed a launch again.
The delays in starting have added to skepticism about the market and many think that it is not needed.
