New regulation to avoid taxes – Changes to the Tax Code

The draft amendment to the Tax Code on 30th December, 2015 prepared by the Ministry of Finance provides regulations to allow the tax authorities to challenge the effects of any actions carried out primarily in order to achieve a tax advantage.

The essence of the clause

The proposed Article 119a of the Tax Code provides that the act, which was carried out primarily in order to achieve a tax advantage and are contrary to the conditions and purpose of the tax law, will not follow a tax benefit.

In this case, the tax consequences of the actions would be determined on the basis of these state of affairs, which could occur, if proper steps were taken. Appropriate action is defined as an activity that an entity could accomplish if they would act sensibly and guided by genuine objectives, other than to gain a tax advantage, contrary to the objective and purpose of the tax bill. However, in a situation where the only objective was to achieve a tax benefit by the taxpayer, the tax consequences would be determined on that basis, if the procedure generally was not made.

Artificial costruction

If the behaviour of the taxpayer is deemed as ‘artificial’, then the new rule will be applied. To assess whether the method of the action was artificial, you should consider the following:

• unreasonable sharing of operations, the involvement of intermediaries, regardless of economic justification,
• does it lead to an identical or similar initial state,
• does the actions eliminate or compensate each other,
• an economic risk of exceeding the expected benefits, other than tax.

A limit of 100,000.00 PLN

According to the reapproved tax avoidance clause, is it not applicable if the tax benefit or the sum of the benefits of the many activities of the taxpayer, does not exceed the amount of 100,000.00 PLN.

Special security report

The clause against tax avoidance will not apply to entities that have obtained a special report or applied for it, but their application has not been settled within the prescribed period.

The special report will include specifically: a comprehensive description of the activity to which or whose application was made, the assessment that the action or the group of actions did not apply the provision of Article 119a, instruction on the right of compliant to the administrative court.

The clause stipulates that the deadline for processing the request for a special report will be no longer than 6 months. Additionally, the proposal would be subject to a fee of 20,000.00 PLN.

Source: April, 2016