Is the exit tax from individuals compatible with the Constitution of Poland?

Date 1 January 2019 the new regulations of the Act of 26 July 1991 on personal income tax[1] , introducing the so-called exit tax – a tax imposing on the legislator the change of the tax residence of natural persons subject to an unlimited tax obligation in Poland and the transfer of assets of these persons outside Poland, if, as a result of this transfer, Poland loses in whole or in part the right to tax profits from the sale of these assets for consideration[2] .

Given the extremely rapid pace of legislative work, the undoubtedly unfavourable quality of tax legislation, the use by the legislator of the concepts of out-of-acute, sometimes extreme lack of precision of the above-mentioned regulations, it is possible to ask the question of compliance with the rules Article 30da-Article 30di u.p.d.o.f.

with the Basic Act[3] .

1. Introduction

The above question is all the more important if account is taken of the current legal and factual state of play regarding the functioning of the Polish Constitutional Court and the most profound doubts about the constitutionality of the parts of the judiciary, including the constitutionality of the appointment of the current President of the Constitutional Court. The subject matter of this publication is the analysis of the problem of compliance of regulations introducing into the Polish legal system the so-called exit tax with the Constitution of the Republic of Poland, and due to the scope of this issue, the issue of compliance of the above-mentioned Polish law with the law of the European Union and the influence of non-compliance in the above-mentioned scope on the assessment of the constitutionality of the abovementioned regulations was left outside the scope of this analysis.[4] .

2. Exit tax under the Personal Income Tax Act

The legal structure of the u.p.d.o.f. regulations introducing exit tax indicates that this tax is to charge hypothetical profits rather than profits actually achieved by the taxpayer in terms of economic content or profits due to the taxpayer, although not yet received. Provision Article 30da(1) the tax on income from unrealised profits is:

• 1) 19% the tax base when the tax value of the asset is determined;
• 2) 3% the tax base — where the tax value of the asset is not determined.

In accordance with the provisions Article 30da(10) sentence second u.p.d.o.f. the tax value of the asset shall not be determined where, in accordance with separate provisions, for the purposes of income tax, no account is taken of the cost of obtaining revenue from the payment of the asset.

This means that in the absence of the cost of obtaining revenue from the sale of the asset, the tax value of the asset is not determined, which is equivalent to taxation of the amount 3% the tax base.

A contrario when taking into account the cost of obtaining revenue from the sale of an asset for consideration, the tax value of the asset is determined, resulting in taxation of 19%. By virtue of the provisions Article 30da(2) the tax on income from unrealised profits shall be subject to:

1. the transfer of an asset outside the territory of the Republic of Poland, as a result of which the Republic of Poland in whole or in part loses the right to tax revenue from the disposal of that asset, with the transferred asset remaining the property of the same entity;
2. change of tax residence by a taxable person subject to the tax obligation in the Republic of Poland on all of his income (unlimited tax obligation) resulting in the Republic of Poland losing in whole or in part the right to tax the proceeds of the disposal of the asset owned by that taxpayer, in connection with the transfer of his residence to another State[5] .

It follows from the literal wording of the above regulation that if the transferred asset does not remain the property of the same entity (e.g. in the case of export to a foreign capital company), its transfer outside Poland will not be subject to tax on unrealised profits.

In the above case, an open catalogue of activities of the taxpayer, which constitute a ‘transfer of an asset’, is the source of some interpretative risk in dubio pro fisco. The term ‘transfer of an asset’ is defined under Article 30da(4) u.p.d.o.f.

by definition ‘by calculation’, which however does not exist exhaustive the nature and the introduction of an open catalogue of taxable conditions. This provision provides that the transfer of an asset outside the territory of the Republic of Poland referred to under Article 30da(2)(1) u.p.d.o.f.

shall cover in particular the situation where:

1. the taxable person in question under Article 3(1) u.p.d.o.f.6 , transfer to its foreign establishment an asset previously associated with economic activity carried out in the territory of the Republic of Poland;
2. the taxable person in question under Article 3(2a) u.p.d.o.f.7 , transfer to the State of its tax residence or to a country other than the Republic of Poland in which it conducts business through a foreign establishment, an asset previously associated with economic activity carried out in the territory of the Republic of Poland by a foreign establishment;
3. the taxable person in question under Article 3(2a) u.p.d.o.f., transfers to another country all or part of economic activity carried out so far through foreign plant located in the territory of the Republic of Poland.

In accordance with the provisions Article 30da(3) u.p.d.o.f.

in the case of an asset not related to economic activity, tax on income from unrealised profits in the case in question under Article 30da(2)(2) u.p.d.o.f., only assets constituting: all rights and obligations in a company which is not a legal person, shares in a company, shares and other securities, derivatives of financial instruments and titles of participation in capital funds (personal property), if the taxpayer is resident in the territory of the Republic of Poland by a total of at least five years in ten-year the period preceding the day of the change of tax residence.

According to the content Article 30da(7) u.p.d.o.f. income from unrealised profits is the excess market value of the asset determined at the date of its transfer[8] or the day preceding the day of the change of tax residence above its tax value[9] .

By virtue of the provisions Article 30da(8) the market value of the asset is determined by:

• 1) according to Article 19(3) u.p.d.o.f.10 – in the case of personal assets and assets not subject to a change in economically significant functions, assets or risks;
• 2) according to Article 23o u.p.d.o.f.11 – in other cases.

The market value of the assets of the taxpayer covered by the marital property union shall be determined by each spouse at half the market value of those assets.[12].

Where the taxable person's taxed income on unrealised profits, the value of the asset, without reasonable economic reasons, deviates from its market value and as a result does not show income on unrealised profits or shows that income at a low level, the taxable person's income and the tax due on income from unrealised profits is determined by the tax authority[13].

The tax base on income from unrealised gains is the sum of the income from unrealised gains established for each item of assets, with the entire company (its organised share) in the case of a transfer of an undertaking or an organised part of it, the income from unrealised gains for the entire enterprise (its organised part)[14].

Where a taxable person subject to an unlimited tax obligation in Poland also derives income (revenue) outside the territory of the Republic of Poland and such income is subject to an equivalent tax in a foreign country to tax on income from unrealised profits, the income (revenue) is linked to income (revenue) generated in the territory of the Republic of Poland, and the tax calculated on the total amount of income is deducted from the amount equal to the tax paid in a foreign country, the amount of the deduction must not exceed that part of the tax calculated before the deduction is made, which is proportionally attributable to income obtained in a foreign country[15].

Property criterion for the application of regulations Article 30da u.p.d.o.f. is the market value of transferred assets exceeding the amount 4,000,000 PLN. According to the disposition Article 30da(14) u.p.d.o.f.

taxpayers are obliged to submit to the tax offices declarations, according to the established formula, of the amount of income from unrealised profits to 7. on the day of the month following that in which the total market value of the transferred assets exceeded the amount 4,000,000 PLN, and pay the tax due by that date.

If after the month in which the total market value of the transferred assets exceeds the amount 4,000,000 PLN Further assets are transferred, taxpayers are required to submit a declaration to 7. on the day of the month following the month in which the components are transferred and payment of the duty due by that date.

In turn, according to the sound Article 30db(1) Regulations Article 30da u.p.d.o.f.

shall not apply if the total market value of the transferred assets does not exceed the amount 4,000,000 PLN, where, in the case of spouses, the above limit on the market value of an asset covered by the marital property union applies together to both spouses[16].

Further regulations on tax on unrealised income on exemptions[17] and exemptions[18] from the scope of taxation, this tax does not affect the assessment of the compatibility of income tax with the Polish Constitution. Regulations are crucial in this respect Article 30da u.p.d.o.f.

and therefore provisions Article 30dc and Article 30di u.p.d.o.f. has been left outside the scope of this analysis. A specific regulation, on the other hand, is Article 30df u.p.d.o.f., which provides for the reimbursement of tax collected by the tax on unrealised profits.

By Content section 1 that provision if the taxable person during the period 5 years, counted since the end of the tax year, in which he transferred an asset outside the territory of the Republic of Poland, he transferred it back to the territory of the Republic of Poland, he may apply for a refund of income tax on unrealised profits in part of the component.

In accordance with the provisions Article 30df(2) u.p.d.o.f.

if the taxable person during the period 5 Since the end of the tax year in which he changed his tax residence, he will again become a person subject to an unlimited tax obligation in Poland, he may apply for a refund of the tax paid on income from unrealised profits, with the refund not applicable to the tax on assets which remain linked to the foreign establishment of the taxpayer located outside the Republic of Poland.

Regulations also deserve attention Article 30de u.p.d.o.f., introducing rules for instalments of tax on so-called unrealised profits. Provision Article 30de(1) u.p.d.o.f.

provides that the taxable person may apply to the competent head of the tax office for the payment of all or part of the income tax on unrealised profits in instalments for a period not exceeding 5 years from the end of the tax year in which it was required to pay if the transfer of assets or the transfer of tax residence takes place in the territory of an EU Member State or of another EEA State which is a party to an agreement with the Republic of Poland or the EU on mutual assistance for the recovery of tax claims, equivalent to the mutual assistance provided for in Directive 2010/24/EU[19].

In accordance with the provisions Article 30de(2) u.p.d.o.f.

where there is a real risk of non-recovery of income from unrealised gains, the payment of all or part of that tax shall be distributed in instalments after the taxpayer has lodged a security for the performance of the tax liability in this respect, together with a prolongation fee in the form provided for in the Law of 29 August 1997 - Tax Ordinance[20] for tax performance safeguards.

An important provision determining the scope of this tax on unrealised gains is also Article 30dh U.p.d.o.f., which section 1 provides that where the transferor of an asset[21] is a company not a legal person, regulations Article 30da-30dg u.p.d.o.f. and provisions based on Article 30di u.p.d.o.f.

shall apply to taxable persons having rights to participate in the profits of such a company. In that case, the provisions Article 8(1) u.p.d.o.f. shall apply mutatis mutandis.[22]. In addition, according to the provisions Article 30dh(3) u.p.d.o.f., regulations Article 30dh(1)(2), Article 30da-30dg u.p.d.o.f.

and provisions based on Article 30di u.p.d.o.f.

shall apply mutatis mutandis to the free transfer to another entity located in the territory of the Republic of Poland of an asset and to the transfer of an asset to an entity other than a company or cooperative – if the transfer or the contribution of the Republic of Poland loses in full or in part the right to tax revenue from the disposal of that asset.

Noteworthy is the fact that, as far as sound is concerned, Article 30dh(3) u.p.d.o.f.

a donation of an asset to a foreign entity is an event treated on an equal basis with the "transfer of an asset" outside Poland (no matter how the owner of such an asset changes in such a case), this aport of an asset to any foreign company (and to cooperatives) is a tax neutral event from the perspective of taxation of the so-called unrealised profits.

1. Constitutional requirements for the regulation of tax law in a democratic state of law
2. 1. Principle of a democratic rule of law

In accordance with the provisions Article 2 The Constitution of the Republic of Poland, is a democratic legal state that implements the principles of social justice.

This provision constitutes the foundation of the constitutional legal order of the Republic of Poland, having fundamental importance for the legal situation of citizens and authorities of the state.

In principle, the democratic rule of law derives from other functionally related principles, which constitute its specificity and detail, of particular importance under tax law, due to the high degree of interference in the sphere of freedom and ownership of citizens, such as the principle of trust in the State and its rights.

In tax law, the principle of trust in the State and the law it provides means that the legislator must guarantee maximum predictability and calculation of the tax authorities’ decisions on the basis of those standards.

Respect by the State and its authorities for the principle of trust in the State and its law also means the obligation to create a clear, coherent and transparent system of tax law.

The implementation of the democratic rule of law within tax law has an exceptionally rich and uniform jurisprudence of the Constitutional Court and administrative courts.

For example, in the judgment of 8 November 1998[23] The Constitutional Court stressed that: “The principle of citizens’ trust in the state... gives birth to certain obligations in the field of State action.

In particular, there is an obligation to legislate in such a way as not to restrict citizens' rights by building a system of law that is clear, consistent and understandable to citizens, which gives them a guarantee of legal stability." The consequence of the democratic rule of law is Article 32 Constitution of the Republic of Poland.

According to Article 32(1) The Constitution of the Republic of Poland is all equal and entitled to equal treatment by public authorities, while according to Article 32(2) The Constitution of the Republic of Poland cannot be discriminated against in political, social or economic life for any reason.

The above Article contains a directive on equal treatment, addressed to the legislator, which is a guideline in the process of legislating and applying the law, which must in particular be applied to tax law, because of the particularly strongly outlined sovereignty of the State in its case and the unequal relationship between the taxpayer and the State.

The Directive on equal treatment and the prohibition of discrimination should therefore consistently lead to a prohibition of tax discrimination. The principle of equality before the law one from the foundations of democratic legal order.

This principle gives rise to the right to equal treatment by public authorities and to the prohibition of discrimination by public authorities in political, social and economic life, which cannot be justified in any way.

3.2. Prohibition of interpretation in dubio pro fisco

Tax law prohibits the interpretation of rules that give rise to doubts in favour of the tax. This prohibition is one of the constitutional foundations of Polish tax law as a democratic state of law.

It is produced from Article 2 The Constitution of the Republic of Poland and is confirmed in extensive and uniform case law of the Constitutional Tribunal and administrative courts.

In the resolution of 26 April 1994[24] The Constitutional Court stressed that "an interpretation extending the tax obligation (...) without the explicit wording of the law (...) would be incompatible with the concept of a democratic rule of law". The NSA, in its judgment of 3 April 2001[25] stated that “the administrative court...

should use an interpretation that is in line with the principles already established in the case law.

one of these is the principle of interpreting legal doubts in favour of the taxpayer.’ The prohibition of interpreting dubio pro fisco's questionable legal rules has been repeatedly highlighted in the case law of administrative courts, including in NSA judgments of 14 November 2013[26] and 20 November 2013[27].

The need to settle any legal doubts in favour of the taxpayer is absolute and is confirmed in the uniform case law of the administrative courts and the Constitutional Court.

For example, NSA in judgment of 20 November 2013 pointed out that "in line with constitutional requirements, unclear tax regulations must be interpreted in favour of taxpayers and, consequently, if such regulations prove to be ultimately ambiguous, a solution that takes into account the interests of the tax benefit subject rather than ruling in dubio pro fisco"[28].

In turn the WSA in Białystok in the judgment of 16 October 2013[29] He pointed out that ‘tax obligations cannot be presumed and determined by analogy or by an extension interpretation.

However, in the case of various possible language interpretations of the same legal text, tax authorities should, in view of the principle of trust of entities subordinate to the State and the law it provides, follow not so much the principle in dubio pro fisco as the principle in dubio pro tributario.

This is the case-law trend of the courts which is reflected in the provisions Article 217 The Constitution of the Republic of Poland, thus referring to the existing 600 years in Polish tax legislation rules numlum tributum sine lege.

In conclusion, the taxpayer can freely shape its civil and legal trading activities and the tax law will apply "only" to the effects of these activities.

Should there be doubts on the basis of the literal wording of the law as to the existence of a tax obligation, these doubts should always be settled in favour of the taxpayer, which should mean that the tax obligation will not arise.

The negative effects of the errors of the legislature can only be borne by the State, as the creator of the law, and never the taxpayer.

3.3. Prohibition of tax discrimination

The prohibition of tax discrimination belongs to the constitutional foundations of tax law and Polish law in general. The inadmissibility of tax differentiation of similar entities in the same factual situation is due to the principle of a democratic rule of law expressed under Article 2 Constitution of the Republic of Poland.

Tax discrimination would also violate the principle of social justice, detailing the concept of "democratic rule of law" and the principle of equality expressed under Article 32 Constitution of the Republic of Poland.

In the context Article 84 The Constitution of the Republic of Poland, which establishes the principle of universal taxation, all taxpayers who are in the same factual and legal situation have the obligation to bear the same tax burden to the State and no taxable person must be obliged to bear greater fiscal benefits than other addressees of the same tax law.

The tax authority and the courts applying the law therefore have a constitutional obligation to treat entities governed by tax law equally.

Tax discrimination, based on the place of residence or the state of allocation of its assets, would also constitute a breach of freedom of movement and settlement, as well as of freedom of establishment, as the greater tax burden undoubtedly discourages certain actions, which entail a tax burden separated from any real asset.

Furthermore, tax discrimination is tantamount to violating the principle of freedom of economic activity expressed under Article 22 Constitution of the Republic of Poland. In the judgment of 11 May 2004[30] Constitutional Court, recognising that provision Article 24b(1) o.p.

for being contrary to the essential law, he pointed out that “it violates the principle of citizens' trust in the state and the law that comes from Article 2 the Constitution of the Republic of Poland, as well as the principle of freedom of economic activity expressed in the freedom to lay down their civil relations, i.e.

Article 22 The Constitution of the Republic of Poland’, among others, through the vague and vague language design and the associated too large scope of the ruling interference of authorities applying tax law in the sphere of the rights and freedoms of the individual, and consequently the unpredictability of the activities of these bodies.

3.4. Obligation of precise and clear language design of tax legislation

In the judgment of 11 May 2004 The Constitutional Court stressed that ‘from under Article 2 The Constitution of the Republic of Poland rules the rule of law and requires the legislator to comply with the principles of correct legislation.

(...) As a violation of constitutional requirements, it is necessary to assess such vague and vague formulation of a provision which creates uncertainty for its addressees about their rights and obligations.

It creates an overly broad framework for authorities applying such a provision, which must in fact replace the legislator with matters which are not clear and vaguely regulated.

The legislator may not, by vague wording of the text of the provisions, leave the authorities to exercise excessive freedom in practice to determine the subject matter and the constitutional limitations of the individual’s freedoms and rights.

In the above judgment, the Constitutional Court pointed out that "the breach of a certain level of ambiguity of legal provisions may constitute a self-evident ground for finding their incompatibility with both a provision requiring legal regulation of a particular area, such as restrictions on the exercise of constitutional freedoms and rights (Article 31(3) sentence 1 Constitution), as well as expressed under Article 2 Constitution Rule of Law’.

The legislator must not impose legal tax sanctions on the taxable person in respect of activities which are not legally prohibited.

Constitutional Court in judgment of 11 May 2004 also indicated that "one from elements of the constitutional principle of trust in the state and the law (Article 2 The Constitution of the Republic of Poland) is a norm prohibiting the sanctioning of (...) such behaviours of addressees of regulations which are lawful behaviours (...).

If, therefore, the addressee carries out legal acts which are lawful and their purpose is not prohibited by law, it is therefore difficult to regard as a correct such qualification which the tax objective achieved (also tax) treats as equal to the prohibited objectives." It should be noted that any prohibition on such or other activities belongs to a sphere other than tax law of the branches of law and should also be found there.

Tax law may, on the other hand, provide for such or other consequences for taxpayers to take certain measures in relation to their fiscal burden.

Furthermore, it should be stressed that the non-subscription calculation of the conditions for taxing or the absence of such conditions in practice means that national tax administrations may at least partially rely on non-statutory conditions, i.e.

not mentioned expressis verbis in the Act to decide on taxation, which in itself should be considered to be a violation of the constitutional requirement of statutory regulation in tax matters, and consequently Article 2 with regard to Article 217 Constitution of the Republic of Poland.

Such imprecise wording of tax law may also lead to unconstitutional restrictions on property rights through taxation, which in turn violates Article 31(3) sentence 1 Constitution of Poland[31].

Moreover, such a situation may lead to a tax obligation from analogy or even a presumption, which would manifestly violate Article 2 with regard to Article 217 Constitution of the Republic of Poland.

1. Analysis of compliance of the legislation on personal income tax from the perspective of compliance with the Constitution of Poland

From regulation Article 30da u.p.d.o.f., in particular from section 1 and 2 and 7 and 10 that provision shows that tax on unrealised profits is subject to a hypothetical income, which would in fact have occurred if the taxpayer had disposed of the assets which were transferred outside Poland or for which Poland had lost all or part of its right to tax in the event of their sale after the tax return.

This legislative procedure is tantamount to the actual tax burden on the taxpayer's assets and not his income. The legal structure of the tax on unrealised profits is detached from the taxpayer's income or loss and economic situation in general.

A taxpayer with relatively large assets may incur losses, and nevertheless in certain cases under Article 30da(2) u.p.d.o.f. will be obliged to pay the tax. The tax legislature's assumption that certain assets will generate profits in the future is detached from reality.

In a sense, it can be said that this is the introduction of a legal obligation to obtain income and the right-to-tax repression of those who do not achieve it. Such persons will pay a tax on the profits they have yet or never received, which will in fact charge their assets.

The tax on unrealised gains is therefore completely decoupled from the profits that the assets generate and which, moreover, are at all possible to generate using them.

In many cases this tax will simply constitute almost 19% the value of assets transferred abroad or assets for which Poland will lose its right to tax as a result of a change in the tax residence of their owner, who is a Polish tax resident (in the case of almost zero tax value of that property).

Taxation of such hypothetical income may in many cases lead to the need to dispose of certain assets as a tax constituting almost 19% their value may exceed the financial capacity of the owner of certain assets, which is the consequence of the actual income obtained by him, and this tax is de facto chargeable to the property.

As a result, the legal structure of the tax on unrealised profits may impose personal income tax on taxable persons prior to the choice between selling part of the property in order to satisfy the claim of the Polish tax formally on the basis of a virtual profit which does not actually exist, and in practice on the transfer of assets to another country and the waiver of the change of tax residence or the transfer of its assets to another EU Member State, which constitutes a significant restriction on freedom of movement, including leaving Poland.

The criterion of this legal tax discrimination is a property criterion[32]. Too contrary to Article 2 Constitution of the Republic of Poland in connection with its Article 217 Regulations should be recognised Article 30da(1)(2) u.p.d.o.f.

in relation to section 7 and 10 and 14 that provision, as a levying income tax in connection with the undertaking by the taxable person of legal actions permitted by law, the freedom to perform which is legally guaranteed by the basic law (e.g.

freedom to leave the territory of the Republic of Poland) together with the necessity to pay that tax within the time limit 7 days. Moreover, use under Article 30da(4) u.p.d.o.f.

of the phrase "in particular" causes that other than expressis verbis mentioned in it may prejudge the "transfer of an asset" outside the territory of the Republic of Poland, which is equivalent to the possibility to remove the tax obligation from non-statutory conditions, which can only be presumed to exist as a "transfer of an asset" outside the territory of the Republic of Poland.

The existence of an alleged tax obligation gives the tax authorities, in principle, the total freedom to extend the tax obligation by covering the scope of application Article 30da(4) u.p.d.o.f. in principle almost every act of the taxpayer.

Such a significant level of impreciseness and non-integrity in the case of a provision of the tax law which indirectly prejudges taxation or the absence thereof constitutes a direct violation Article 2 with regard to Article 217, and Article 2233 and Article 31(3) sentence 1 Constitution of the Republic of Poland.

It should be stressed that the introduction in the regulations under consideration of the u.p.d.o.f. of the possibility of reimbursing the tax on unrealised profits does not change the above assessment of the above-mentioned provisions from the perspective of their compliance with the Constitution of Poland.

The discretion of the tax authorities, which, arbitrarily and in isolation from the economic situation of the taxpayer, may deny him the possibility to be distributed in instalments of the abovementioned tax, is essentially almost unlimited.

In practice, in the event of a tax liability being imposed, where the taxpayer does not dispose of the actual income from that tax, the payment of that tax will often entail a sale of assets to satisfy the tax claim.

The lack of the possibility of reimbursing the tax, and thus de facto defermenting the payment of the tax to a significant extent, will in such a situation be the most extensive restriction, if not by practical elimination, free movement and settlement in other countries, including other EU Member States.

This will also be the farthest restriction of the freedom to take up business in other countries, including those belonging to the EU. This means a direct breach of content Article 52(2) The Constitution of Poland, which guarantees freedom to leave the territory of Poland. In the light of regulation Article 30da(1)(2) u.p.d.o.f.

in relation to section 7 and 10 and 14 This provision cannot be considered to be in conformity with the wording of the sanctioned tax which has been decoupled from any asset and which is the consequence of a permanent exit from Poland. Article 52(2) Basic Act.

This legal tax repression constitutes the most extensive restriction on the possibility of leaving the territory of Poland, and in some cases will even eliminate the possibility of permanently leaving Poland.[34].

To conflicting Article 2 with regard to Article 217 The Constitution of the Republic of Poland should also recognise the provision itself Article 30da(7) u.p.d.o.f., which defines the concept of income from unrealised profits as an excess of the market value of an asset determined on the date of its transfer or on the day preceding the date of the change of the tax residence above its tax value.

Non-constitutionality in this respect will be prejudged by the fact that the definition of income has been taken away from the objective fact that it has been achieved by establishing that this income arises on the date of the transfer of an asset outside Poland or on the day before the change of the tax residence of the taxpayer.

Under the above definition, it is obvious and uncontested that, at the abovementioned date, the taxpayer does not obtain any income, unless, on that date, he would have sold the aforementioned assets.

The legislator has openly and directly deducted taxation from his causa by imposing a legal tax penalty on wealthy individuals in the event of their specific behaviours which are legally permitted. In the case of a natural person, the obligation to pay income tax should be closely linked to the obtaining of a specific asset.

This legal discrimination constitutes a violation of the provisions Article 84 Constitution of the Republic of Poland, establishing the principle of universality of taxation.

Tax payers who change their place of residence outside the territory of the Republic of Poland would bear a tax burden which would not be borne by persons who change their place of residence in Poland.

Such a different legal tax treatment of taxable persons on grounds of their place of residence or place of business undermines the principle of universal taxation (Article 84 Constitution of the Republic of Poland), principle of equality (Article 32(1) Constitution of the Republic of Poland), including a constitutional prohibition of discrimination for any reason (Article 32(2) Constitution of the Republic of Poland), and the principle of freedom to leave Poland (Article 52(2) Constitution of the Republic of Poland).

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1 Act of 26 July 1991 on income tax on individuals, i.e. Journal of Laws of 2018, item 1509 as amended, hereinafter referred to as "u.p.d.o.f."

2 These amendments have been made to u.p.d.o.f. under the provisions Article 1(27) Act on 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 referred to as "u.z.u.p.d.o.f."

3 Constitution of the Republic of Poland from 2 April 1997, Journal of Laws of 1997, item 483 as amended, hereinafter referred to as ‘the Constitution of the Republic of Poland’.

4 Issues of non-compliance Article 30da-Article 30di u.p.d.o.f. with EU law has been discussed in the following publications: R.A. Relapse, Is the "exit tax" compatible with EU law?, "Customs and Tax Law Monitor" 2019, No 2, R.A.

Relapse, Exit tax from individuals may violate Article 49 Treaty on the Functioning of the EU, Legal and Tax Advice - RB Newsletter 2019, No 1 (6), p. 11 and J. Kieć, B.

Relapse, Tax on unrealised profits of individuals in the light of compliance with European Union law and the Constitution of the Republic of Poland, "Legal and Tax Advice - RB Newsletter", 2019, No 1 (6), p. 37.

5 Provision Article 30da(5) u.p.d.o.f. hereby introduces an exemption from tax on income from unrealised profits as a result of a change in the tax residence in question under Article 30da(2)(2) u.p.d.o.f. assets which, after the change of tax residence, remain associated with the foreign establishment of the taxpayer located on the territory of the Republic of Poland, which changed the tax residence.

6 i.e. a taxable person subject to unlimited tax obligation in Poland.

7 i.e. a taxable person subject to a limited tax obligation in Poland.

8 Under regulation Article 30da(6) u.p.d.o.f. the day of the transfer of the asset outside the territory of the Republic of Poland is the day preceding the day on which the item ceases to be assigned to activities carried out in the territory of the Republic of Poland, including through a foreign establishment.

9 By Sound Article 30da(10) u.p.d.o.f. the tax value of the asset is a value, not previously included in the cost of obtaining revenue in any form that would be accepted by the taxpayer for the cost of obtaining revenue if the asset were to be disposed of by the taxpayer. The tax value of the asset shall not be determined where, in accordance with separate provisions, for the purposes of income tax, the cost of obtaining revenue from the sale of that asset is not taken into account.

10 According to the above provision, the market value of the proceeds from the sale of goods or property rights paid shall be determined on the basis of the market prices applied in the course of trade in goods or rights of the same type and species, taking into account in particular their state and degree of consumption and the time and place of the disposal.

11 i.e. in accordance with the arm’s length principle. By sound Article 23o(1) u.p.d.o.f. related parties are obliged to set transfer prices on terms that would determine between unrelated parties.

12 Article 30da(9) u.p.d.o.f.

13 Article 30da(11) u.p.d.o.f.

14 Article 30da(12) u.p.d.o.f.

15 Article 30da(13) u.p.d.o.f. Article 30dg(1) u.p.d.o.f. if based on Article 22(1n)(1)(1na) U.p.d.o.f. or Article 22g(1)(7)(8) u.p.d.o.f.

the taxable person shall take into account in the cost of obtaining revenue the market value of the asset determined in the EU Member State for the purposes of taxing an equivalent tax to tax on income from unrealised profits, the taxable person being obliged to add to the statement in question under Article 45(1) and (1a) point 2 u.p.d.o.f., information, according to the established formula, of the market value of that component.

This information shall be accompanied by a document issued or endorsed by the competent authority of the State referred to in the sentence. first, the market value of that component.

This information is made up of the tax year in which the taxpayer included the market value of the asset, determined by the Member State of the European Union other than the Republic of Poland (Article 30dg(2) The head of the tax office may determine the market value of the taxpayer's assets in question.

Under Article 30dg(1) u.p.d.o.f., at a level other than that adopted for tax purposes with a tax equivalent to tax on income from unrealised profits, if that value is higher than the market value (Article 30dg(3) u.p.d.o.f.).

16 Article 30db(2) u.p.d.o.f.

17 Provision Article 30dc u.p.d.o.f. introduces in certain cases an exemption from tax on income from unrealised profits when the asset has been transferred outside the territory of the Republic of Poland for a limited period of time, but no longer than 12 months.

18 Provision Article 30dd u.p.d.o.f. introduces tax exemptions on unrealised profits of assets transferred to public benefit organisations and intended for the official use of employees directly related to the work performed, not constituting fixed or working assets within the meaning of the accounting rules.

19 Directive 2010/24 to 16 March 2010 on mutual assistance in the recovery of claims relating to taxes, duties and other charges (Official Journal of the European Union L, No. 84/1 to 31 March 2010), hereinafter referred to as ‘Directive 2010/24”.

20 Act of 29 August 1997 Tax Ordinance, i.e. Journal of Laws of 2018, item 800 as amended, hereinafter referred to as ‘O.P.’.

21 In accordance with the provisions Article 30dh(2) u.p.d.o.f. whenever Under section 1 and Article 30da-30dg u.p.d.o.f. is referred to as an asset, it also means an undertaking or an organised part of an undertaking.

22 According to the disposition Article 8(1) U.p.d.o.f.

revenue from participation in a company which is not a legal person, from joint ownership, joint venture, joint ownership or joint use of property or property rights in each taxable person shall be determined in proportion to its right to share in profit (share) and, subject to section 1a, is combined with other revenue from sources from which income is taxed on the scale in question under Article 27(1) u.p.d.o.f.

In the absence of any opposing proof, the rights to share in profit (share) shall be deemed to be equal.

23 Judgment of the Constitutional Court 8 November 1998, reference no. K 7/89.

24 Resolution of the Constitutional Tribunal 26 April 1994, reference no. W.11/93, publ. Journal of Laws of 1994, item 263.

25 NSA judgment of 3 April 2001, reference no. III SA 3108/00.

26 NSA judgment of 20 November 2013, reference no. II FSK 154/12.

27 NSA judgment of 20 November 2013, reference no. II FSK 152/13.

28 NSA judgment of 20 November 2013, reference no. II FSK 1709/12.

29 Judgment of the WSA in Białystok of 16 October 2013, reference no. I SA/Bk 335/13.

30 Judgment of the Constitutional Court 11 May 2004, reference no. K4/03, publ. Journal of Laws of 2004, item 1288, hereinafter referred to as ‘the judgment of 11 May 2004”.

31 This provision of the Basic Act provides that restrictions on the exercise of constitutional freedoms and rights may only be laid down in the Act.

32 The property criterion is a provision Article 30(14) in conjunction with the recipe Article 30db(1) u.p.d.o.f., which shows that regulations Article 30da u.p.d.o.f. shall apply if the total market value of the transferred assets exceeds the amount 4,000,000 PLN.

33 Provision Article 22 The Constitution of the Republic of Poland states that restrictions on freedom of economic activity are allowed only by law and only because of important public interest. On the other hand, the public interest cannot be regarded as an important public interest in the fiscal interests of a state whose implementation violates the fundamental constitutional values as a result of the legislative quality of those provisions and their separation from the real wealth and economic situation of a taxpayer who does not receive any income in terms of economic content.

34 This will apply in the case of a change of residence to another State by a natural person subject to exit tax, in accordance with the provisions under consideration, which has not obtained any income, does not have the means to pay the abovementioned tax and is not able to liquidate his assets in order to pay the abovementioned tax.