There are fewer and fewer interpretations of individual tax law

The Ministry of Finance indicated, in response to one of the parliamentary interpellations, the most common reasons for refusal to give interpretation of tax law by the Director of National Tax Information.

Undoubtedly, the tendency to reduce the number of requests for such interpretations will increase after change Tax Ordinance, which came with the amendment of tax laws, which came into force from the beginning 2019[1] .

The tightening of the rules concerns, inter alia, the conditions for cases where an individual interpretation will be refused.

Introduction

Topics of the interpelling by Stanisław Tyszko[2] concerning tax rulings. The Deputy Marshal of the Sejm reported that the number of tax rulings issued by tax authorities has steadily decreased. In 2015 was theirs.

37,700, In 2016 – 33,600, In 2017 This number dropped drastically to 25,700, and In 2018, from January to the end of October only 19,500 He pointed out the important function of interpretation, citing one of the provisions of the Act of 29 August 1997 – Tax Ordinance (hereafter), namely ensuring uniform application of tax law by tax authorities[3] .

However, according to the Member, “tax authorities abuse the right to refuse interpretation, and many entrepreneurs give up the question of the tax consequences of the planned actions because they fear the negative consequences. The result is the shift of responsibility to the taxpayer. This has a negative effect on business because of legal uncertainty and uncertainty of interpretation"[4] .

The MP asked in his interview four questions addressed to Minister of Finance Teresa Czerwińska:

• 1. What are the reasons why tax authorities refuse to issue tax rulings?
• 2. What was the number of refusals to issue tax rulings? It's the data for years. 2015-2018.
• 3. What is the waiting time for a tax ruling? It's about information in years. 2015-2018.
• 4. What action is the Minister of Finance planning to make tax authorities more likely to issue tax interpretations, which would increase the sense of legal certainty?

Reasons for refusal to give tax rulings

Paweł Cybulski – Undersecretary of State in the Ministry of Finance, who recalled that the Director of National Tax Information, at the request of the person concerned, gives, in his individual case, an interpretation of the provisions of tax law[5] .

It is worth noting that the request for an individual interpretation may relate to the facts or future events in question; the subject matter of this proposal cannot be the tax law governing the jurisdiction and powers and obligations of the tax authorities; the applicant must exhaustive to present the facts or future events and to present its views on the legal assessment of that condition or future event; the applicant shall make a statement under the rigour of criminal liability for false testimony that the elements of the facts covered by the application on the date of its submission are not the subject of the ongoing tax investigation, tax control, customs and tax control, and that in this respect the matter has not been settled as to its substance in the decision or order of the tax authority, and, in the event of a false statement, the individual interpretation provided does not have legal effect.[6] .

Undersecretary of State gave[7] – responding to first Member’s question — the main reasons for refusing to interpret:

• • lack of status as concerned within the meaning of Chapter 1a o.p.,
• • the subject matter of the application is to interpret exclusively or to a large extent non-tax provisions,
• • the entity requests interpretation of the statutory definition,
• • the application for an individual interpretation concerned the provisions of tax law governing the jurisdiction and powers and obligations of tax authorities[8] ,
• • request an interpretation of the facts (not an interpretation of a provision of substantive law),
• • the request for evidence — examination of documents, multi-option, abstractity and non-individuality of the application,
• • missing or incomplete response to the requested authority’s request,
• • the fact or future event corresponds to the subject matter of the general interpretation issued in the same legal state[9] ,
• • Application Article 14b(5b) o.p.
• • withdrawal of the application at the request of the taxpayer.

A representative of the Ministry of Finance recalled in his reply, among others.

Article 14b(5b) o.p., according to which it does not appear to be an individual interpretation of those elements of the facts or future event on which there is a reasonable presumption that they may be the subject of a decision taken using Article 119a o.p., i.e. use of a tax avoidance clause or constitute an abuse of the law.

According to Article 119a(1) o.p. the activity carried out primarily in order to obtain a tax advantage contrary to the subject matter and purpose of the tax law in question does not result in a tax advantage being obtained if the method of action was artificial (avoidance of taxation).

However, according to Article 5(5) Act on 11 March 2004 on tax on goods and services[10], the abuse of the law means the carrying out of transactions which, despite the formal conditions laid down in the provisions of the Act, was essentially intended to achieve tax advantages which would be contrary to the objective pursued by those provisions.

It should also be noted that according to the judgment of the Court of Justice, it does not appear that an individual interpretation of those elements of the facts which, at the date of the application, are the subject of an ongoing tax procedure, tax control, customs and tax control, or where in this respect the case has been settled on its substance in the decision or order of the tax authority[11]. If, on the other hand, the fact or future event described in the application corresponds to the general interpretation in question in the same legal state, a provision will be made that the general interpretation will apply to the factual or future event in the application, while noting that the application is without object.[12].

Statistics against taxpayers

In his reply, the Undersecretary of State informed that the total number of provisions issued — leaving the application unexamined — of discontinuance of proceedings, the refusal to initiate proceedings and the provisions adopted in connection with Article 14b(5b) O.p., based on Article 14b(5a) o.p. on the application of the general interpretation issued In 2015 Common 7,165, In 2016 – 8,633, In 2017 – 7,080, and In 2018 (on 30 November) – 6,002 provisions.

According to the Court of Justice, the interpretation of individual tax legislation appears to be without undue delay, but no later than the time limit 3 months after receipt of the request[13].

A representative of the Ministry of Finance also reported that the average wait time for the taxpayer to issue an individual interpretation, from the date of receipt of the request to the authority until the date of the interpretation, was: ok. 54 days In 2017 and ok.

51 days In 2018 (condition 30 November 2018), and clarified that In 2015 ok. 45% interpretations were issued to 2 months after the date of receipt of applications and In 2016 – 65%

In the opinion of the Ministry, the number of individual interpretations issued depends primarily on the stakeholders themselves, i.e.

taxpayers, and the steadily decreasing number of applications is influenced by a number of factors, including "unquestionably the legislative changes made to limit the possibility of abuse of interpretations to safeguard aggressive tax optimizations".

On the other hand, the applicants may be surprised and surprised to hear a reply to the Member’s question, namely that ‘limiting the number of interpretations issued can be beneficial to taxpayers themselves.

Massive and growing from year to year (as measured one hundred one thousand) After all, the number of individual interpretations issued does not promote legal clarity and certainty from the perspective of the average taxpayer seeking information about his tax situation.’

It should be noted that it is the tax authorities that have repeatedly pointed out that the interpretations of specific individual cases presented by taxpayers in a specific factual state (future event) and other interpretations and examples of case law, cited, for example, in the applicant's position on the legal assessment of the facts or future events, are not binding on those authorities. That is why, among other things, there is a need for taxpayers to ask for an individual interpretation and to obtain certainty about the application of the law in their particular situation, without examining and referring to the interpretations already issued, which would not have been taken into account by the tax.

The tendency of the tax authorities to deal with matters relating to the issue of interpretation was outlined at the end of the reply to the parliamentary interpelling discussed here: “It is the intention of the Minister of Finance to significantly increase the frequency and number of general interpretations and tax explanations. This will allow for greater clarity and certainty of tax law for taxpayers, while at the same time reducing further the number of individual interpretations by removing interpretation doubts that would prompt interested parties to submit requests for an individual interpretation.’

The new rules restrict the issuance of individual interpretations

No doubt the provisions of the amending Act, already in force from the beginning 2019, will further reduce the number of individual interpretations issued by the Director of National Tax Information. According to the amendments to the General Tax Code, the application for an individual interpretation cannot also be subject to tax law to prevent tax avoidance, which relates to fraud of tax law, to conduct actual business activity or to engage in activities in an artificial or non-economic manner, including, inter alia, foreign income of a controlled entity resulting from transactions with related parties, where an entity does not produce economic added value in relation to those transactions or this value is negligible, as well as measures limiting the contractual advantage[14].

According to the new provisions, the refusal to give an individual interpretation also concerns, in the form of a provision, the issuance of an individual interpretation in respect of those elements of the facts or future event on which there is a reasonable presumption that they may be the subject of a decision based on contractual advantage restrictive measures, and the adoption of such a reasoned presumption may also result from a cumulative assessment of more than one an application for an individual interpretation, even if submitted by different applicants[15].

The Amending Act introduced the definition of the tax advantage and the contractual advantage restrictive measures referred to in the above-mentioned tax rulings. Namely, the tax advantage is defined as:

• (a) the absence of a tax obligation, the withdrawal at the time of the tax obligation or the reduction of the amount thereof,
• (b) the formation or overshoot of a tax loss,
• (c) an overpayment or right to reimbursement of the tax or an increase in the amount of overpayment or reimbursement of the tax,

(d) there is no obligation for the payer to collect the tax if it results from the circumstances indicated in the point (a).16.

On the other hand, measures limiting contractual advantages are understood to mean the provisions of double taxation agreements ratified by the Polish Republic and other international agreements ratified by the Polish Republic concerning tax issues or other restrictive or non-benefit measures resulting from these agreements.[17].

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1 Act of 23 October 2018 the amendment of the Personal Income Tax Act, the Corporate Income Tax Act, the Act – Tax Ordinance and some other laws, Journal of Laws of 2018, item 2193; hereinafter: Amending Act.

2 Intervention No 28059 to 4 December 2018

3 Article 14a(1) Act on 29 August 1997 – Tax Ordinance; i.e. Journal of Laws of 2018, item 800.

4 Intervention No 28059, op. cit.

5 Article 14b(1) o.p.

6 Article 14b(2)(2a)(3)(4) o.p.

7 Response from 4 January 2019 for parliamentary interpellation No. 28059, op. cit.

8 Article 14b(2a) o.p.

9 Article 14b(5a) o.p.

10 i.e. Journal of Laws of 2018, item 2174.

11 Article 14b(5) o.p.

12 Article 14b(5a) o.p.

13 Article 14d(1) o.p.; the time limits and periods in question shall not be included in that period. Under Article 139(4) o.p.

14 Article 3(4) Amending Act.

15 Ibid.

16 Article 3(1) Amending Act.

17 Ibid.