Obligation to prepare and publish information on the tax strategy implemented

By the power of the bill with 28 November 2020 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Flat-rate Income Tax Act on certain revenues generated by individuals and certain other laws 1 (further: u.zm.p.d.o.f.o.p.r.) from 1 January 2021 to the Act of 15 February 1992 on corporate income tax 2 (Next: the Corporate Income Tax Act) added new recipe – Article 27c, imposing an obligation on certain taxpayers to draw up and make public information on the tax strategy implemented for the tax year.

According to the justification of the MF, it is another instrument of tax sealing policy to address the problem of tax avoidance and erosion of the tax base of the countries where income is generated. It also aims to increase the tax transparency of entities that play an important role in the market due to their revenues.

Similar solutions already exist in the legal systems of other countries, for example in Australia, where they were introduced on a voluntary basis.

Large and medium-sized enterprises there have the possibility to disclose tax information on their websites under the Tax Transparency Code and can then use this to present their company as a socially responsible business.[3].

Such a solution also exists in the UK, with in this country, like now in Poland, in relation to large taxpayers, publishing information about the tax strategy being implemented is compulsory and failure to comply with this requirement is punishable[4].

1. The circle of taxpayers subject to the obligation to draw up and publish information on the tax strategy

The circle of entities required to draw up and make public information about the tax strategy implemented shall determine Article 27c(1) the Corporate Income Tax Act These are the same entities for which they are based Article 27b(1) the Corporate Income Tax Act from 2018 The Minister responsible for Public Finance shall make public the individual data contained in the declaration CIT-8 the taxpayer, excluding real estate companies, including real estate companies which are part of Tax Capital Groups (hereinafter PGK).

The following are therefore required to draw up and make public information on the tax strategy being implemented:

1) PGK, regardless of the revenue achieved,

1. tax payers other than PGKs whose income in the previous tax year has exceeded the equivalent 50,000,000 EUR, the conversion of the above amounts into Polish gold shall be made at the average euro rate announced by the NBP on the last working day of that tax year.

According to Article 27c(11) the Corporate Income Tax Act the obligation to draw up and make public information on the tax strategy in question does not apply to taxable persons who are party to the interoperability agreement in question either. Under Article 20s(1) Act on 29 August 1997 - Tax Ordinance 5 (Next: o.p.).

This is due to the substance and the conditions for the conclusion of such a contract, namely that the taxable person party to the cooperation agreement undertakes to have an effective and adequate set of identified and described processes and procedures for the management of the performance of obligations under tax law and ensuring that they are properly implemented (the so-called internal tax supervision framework) already within the framework of the agreement itself.

2. Scope of the information required

The extent of the data to be included in the information provided by taxpayers on the tax strategy implemented defines Article 27c(2) the Corporate Income Tax Act In accordance with that provision, it shall include in particular:

1) information on the taxable person’s use:

• (a) processes and procedures for managing and ensuring the proper implementation of the obligations under tax law,
• (b) voluntary forms of cooperation with the KAS bodies;

1. information on the implementation of tax obligations by the taxpayer in the territory of the Republic of Poland, together with information on the number of information provided to the Head of KAS about the tax schemes in question under Article 86a(1)(10) O.E., broken down by the taxes concerned;
2. information on:

• (a) related party transactions within the meaning of Article 11a(1)(4) the Corporate Income Tax Act, whose value exceeds 5% the balance sheet total of assets within the meaning of the accounting rules established on the basis of the last approved financial statements of the company, including non-resident entities of the Republic of Poland,
• (b) planned or undertaken by the taxable person restructuring measures likely to affect the tax liability of the taxable person or associated entities within the meaning of Article 11a(1)(4) the Corporate Income Tax Act; according to the reasons for the amendment 6 , in this respect, information on:
• mergers of companies,
• the transformation of the company into another company,
• to contribute to the company in the form of an undertaking of another company or an organised part thereof (including within the framework of the division of companies),
• exchange of shares;

4) information on requests made by the taxable person for:

• (a) the general tax interpretation in question under Article 14a(1) o.p.,
• (b) the interpretation of the tax law in question under Article 14b o.p.,
• (c) the binding rate information referred to under Article 42a Act on 11 March 2004 on tax on goods and services 7 (Next: the VAT Act),
• (d) the binding excise information in question under Article 7d(1) Act on 6 December 2008 on excise duty 8 (Further: u.p.a.);

1. information on the tax settlement of the taxpayer in the territories or countries applying harmful tax competition as indicated in the implementing acts issued on the basis of Article 11j(2) the Corporate Income Tax Act and Article 23v(2) Act on 26 July 1991 on personal income tax 9 (Further: u.p.d.o.f.) and in the notice of the Minister responsible for public finances, issued on the basis of Article 86a(10) o.p.

Provision Article 27c(2) the Corporate Income Tax Act points out also that the information directory listed therein is an open directory and details the elements to be covered by information on the tax strategy being implemented.

However, the taxpayer may supplement the information he publishes with other data which he considers relevant from the perspective of his activity and from the perspective of the information he wishes to make public. Information about the tax strategy implemented can take the form of a table, for example.

Important: however, the provisions imposing an obligation to produce information on and make public the tax strategy implemented are included in the the Corporate Income Tax Act, they cover information relating to all taxes, not just corporate tax.

The above information shall be given:

• 1) taking into account the nature, nature and size of the business,
• 2) excluding information covered by commercial, industrial, professional or production secrets.

According to Article 27c(3) the Corporate Income Tax Act information on the tax strategy pursued by the PGK should be developed in such a way as to include the required data both for the group as a whole and for the individual companies in its composition. Information about the economic strategy to be implemented should be prepared in Polish or it should be translated into Polish.

3. Time limit and place of publication of information

The information made about the tax strategy to be implemented should be published on the website.

Detailed rules in this respect are laid down in the provisions Article 27c(4-6) the Corporate Income Tax Act According to him, the taxpayer publishes information about the tax strategy for the tax year, prepared in Polish or its translation into Polish, on his website by the end of the year.

twelfth the month following the end of the tax year.

If the taxpayer does not have its own website, the information about the tax strategy is made available in Polish on the website of the related party within the meaning of Article 11a(1)(4) the Corporate Income Tax Act The information made available should be included on the website by year.

Within the same period, the taxable person shall inform the tax office of the address of the website (his own or a related entity) on which he has posted the strategy. The address of the party shall be communicated by the taxable person to the tax office responsible. Such information shall be sent electronically.

4. Penalties for failure to provide information to the tax office

Failure to provide the tax office with information on the website on which information on the tax strategy is implemented or to provide such information in breach of the required time limit is required to pay a penalty.

The basis for its application is Article 27c(8) the Corporate Income Tax Act According to Article 27c(8) the Corporate Income Tax Act in the event of non-compliance with this obligation, the head of the tax office shall impose a fine of up to 250,000 PLN.

The penalty shall be imposed by decision, which means that the taxable person has the right to lodge an appeal in this respect and subsequently a possible action before the administrative court.

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The article comes from the book C.H. Beck Publishing House “A Review of Tax Changes 2021”, https://www.ksiegarnia.beck.pl/ 19763-tax review-change-2021-Agnieszka-bienkowska