In the Polish legal order, there is a rule that the negative changes in income tax which would apply from next tax year must retain the appropriate vacatio legis. Therefore, such amendments should not be published more than one month before the start of the tax year from which they would apply. However, it turns out that this year the Ministry of Finance wants to depart from this principle.
The rule in question that changes in income tax should not be passed more than one month before the start of the tax year is derived from the case law of the Constitutional Court. Time and Time first The CCC ruled so in the judgment of 15 March 1995 (reference no. K. 1/95). In stating that the month is “the final date after which changes that may affect the amount of tax in the coming tax year can no longer be made”.
The introduction of new rules during the tax year will have a negative impact on taxpayers who have legally optimised their tax system in accordance with the laws in force
ATAD Directive 2 and public interest
Poland, Spain, Greece, Latvia, Germany and Romania are the countries to which the European Commission (EC) has called for the removal of deficiencies in the implementation of the ATAD 2 (Directive 2017/952 dated 29 May 2017 amending Directive 2016/1164 on hybrid mismatches between countries third).
ATAD Directive 2 extends the rules already in force in the European Union to provisions on hybrid mismatches between EU countries and countries third (from outside the EU). Hybrid mismatches arise when countries have different rules on the eligibility of entities or tax revenues.
This could ultimately lead, among other things, to double crediting payments to revenue costs, which could put the state budget at risk of depletion.
In this regard, the MF points out that waiving this principle requires an important public interest, with the aim of preventing fraud and fraud by the legislator, leading to evasion of the tax obligation, as an important public interest.
According to the MF, the proposed changes are of this nature, as the aim is to eliminate circumvention practices in the form of aggressive tax optimization. Therefore, it is permissible to depart from the principle of not amending income tax during the tax year due to a condition of important public interest.
Enough time to implement legislation
Although the MF justifies moving away from the rules with an important public interest to date, it can be said that the government had a very long time to carry out the legislative process in an orderly manner, without violating the multiannual rule.
The need to implement the provisions of the ATAD 2 EU countries have already known since 2017 and for their implementation they had time to 1 January 2020 As mentioned above Poland is one from countries which have not been able to bring the provisions of the Directive into national legal order within the prescribed deadline.
The EC has therefore sent a call to remedy the deficiencies in the indicated scope. The pressure from the EC has mobilised the MF to circumvent the multiannual principle of not amending income tax rules during the tax year.
This is indicated by the draft amendment to the Corporate Income Tax Act (CIT), according to which the rules on taxation of hybrid structures would already enter into force 1 April 2020 As you can see, the government through this provision broke the rule of not changing income tax rules during the tax year.
The Polish legislator is apparently in a very hurry, as in the event of failure to comply with the obligation to implement the provisions within the prescribed time limit, the EC can refer the Polish Government to the EU Court of Justice.
The introduction of new rules during the tax year will have a negative impact on taxpayers who have legally optimised their tax system in accordance with the laws in force. The MF, by changing the rules of the game, will at the same time reassure entrepreneurs of the uncertainty and stability of the law in our country. At this point, there are many doubts as to whether the amendment is in line with the demands expressed by the Constitutional Court.
Author: Paweł Boś
Junior Tax Consultant, related to Russell Bedford Poland 2018. Author of numerous articles on legal and tax matters, published in the industry press. Law student at Leon Kozminski Academy in Warsaw.