Date 1 January 2019 In Tax Ordinance Regulations on reporting of MDR tax schemes have emerged. Most taxpayers associate the tax scheme with aggressive tax optimization and use it to avoid taxation of international structures, in particular those available in tax havens. There's a lot of right about that. However, the MDR may also appear in the taxpayer's absence of purpose. It is worth protecting yourself against this possibility.
The main assumption of the legislature in connection with the introduction of the MDR is to obtain information on the potential aggressive planning or abuse of tax planning. The reporting obligation is also intended to serve as a preventive function to discourage taxpayers and their advisers from implementing tax avoidance arrangements.
However, it is clear that the broad definition of the tax scheme goes beyond the framework of activities aimed at obtaining unfair tax advantages. The new rules require taxpayers to report to the National Tax Administration any action which, by lowering tax obligations, may be considered a tax scheme within the meaning of the Act.
This means that, under certain circumstances, legal actions taken by taxpayers may result in an obligation to provide information on the tax scheme.
At the same time, some taxpayers (whose income or costs exceeded the amount in the previous year) 8,000,000 PLN has been obliged to introduce and apply an internal procedure to prevent non-contribution of information on MDR.
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For failing these obligations, the rules provide for severe sanctions – administrative and criminal-tax penalties. Total taxpayers have to face a financial penalty even 31,600,000 PLN.
Few – although regulations have been in force since the beginning of the year, the Act provides for their retrospective application to the activities that occurred before 1 January 2019 The reporting obligation date depends on the type of tax scheme to be reported. In the case of a tax scheme, which is:
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- cross-border tax scheme – the scheme shall be reported if first actions related to its implementation were carried out before the date of entry into force of the Act, but not earlier than after the date 25 June 2018,
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- other than the above tax scheme, the scheme shall be reported if first actions related to its implementation were carried out before the date of entry into force of the Act, but not earlier than after the date 1 November 2018
Although the Ministry of Finance points out that the existence of tax scheme characteristics in a given taxpayer should not be regarded as inappropriate or reprimanded, the majority of taxpayers, however, sees the new obligation as an oppressive operation of the tax equipment.
The high complexity of the new rules is confirmed by the published 31 January 2019 by the Ministry of Finance tax explanations that count above 100 pages.
It is not surprising, therefore, that the majority of taxpayers are confused and not fully able to assess whether their action is a tax scheme and, if so, how to deal with the obligation to report on MDR.
Russell Bedford Poland faces these doubts. In this respect, we offer assistance in assessing the legal and tax implications of actions taken by taxpayers. We propose individual consultations with our tax advisors to determine whether the agreement bears a revised tax scheme and is subject to notification to the National Tax Administration. We advise and implement mandatory MDR procedures for our customers to comply with tax reporting rules. In addition, we also offer training services in this area.
If you have any further questions or doubts, please feel free to contact us.