Planned changes in Tax Ordinance provide the tax authorities with the possibility to consider the tax avoidance of the taxable person's intended activity, who, using the created legal structure, wishes to obtain a significant tax advantage. If the activities of the taxpayer are considered by the tax authority to be devoid of economic content or excessively complex, and at the same time it demonstrates that a different legal structure can be applied and that the taxpayer will improve its financial position as a result, this will give rise to a higher tax liability on the taxpayer.
"What do these judgments mean for taxpayers?"
"Can tax authorities now argue that the taxpayer's actions are "appearable activities" and offset the effects of these actions?"
In the current state of the law, according to Article 199a(2) Tax Ordinance, if, under the appearance of a legal act, another legal act has been carried out, the tax effects are derived from that disguised legal act. The tax authorities, when examining the facts in a given case, may assume that the activities of the taxable person have the appearance of an appearance within the meaning of Article 83(1) Civil code.
Acceptable according to Article 83(1) Civil code invalidated declaration lodged second side for appearance even with her consent. If such a declaration has been made for the purpose of concealing another legal act, its validity shall be assessed according to the characteristics of the activity concerned. Appearance is expressed in the absence of the intention of the parties to produce legal effects and at the same time their intention to create circumstances to mislead persons third to achieve financial benefits.
In examining the actions, the Court of First Instance, on the basis of the current provisions of tax law, analysed all the facts established by the tax authority, in particular the links existing between the parties to the controlled transactions, its financial conditions and its economic justification. On this basis, he took the view that the action of the taxpayer was only intended to achieve financial benefits.
Under Article 199a(3) Tax Ordinance it is pointed out that the tax authority asks the general court to determine whether or not there is a legal relationship or a law involving tax effects, but only if it has doubts in this respect.
In its rulings, the Court of First Instance stated that the obligation to go to the general court arises only if the evidence collected leaves doubts as to the existence of a legal or legal relationship, but it should be borne in mind that the taxpayer has the right to require the tax authority to refer the case to the court. The refusal of the tax authority to consider such an application must be exhaustive That's right.
This gives the taxpayer the opportunity to confirm the existence of a legal relationship or a law actually arising from a contract concluded by the parties. However, the economic conditions of such a transaction are not analysed.
At present, there are no laws that prohibit the taxpayer from taking measures to reduce or even avoid taxation, provided that its activities remain within the limits of the law.
In the judgment dated 30 March 2004 WSA in Warsaw (reference no. III SA 2984/2002) The Court of First Instance pointed out that if the applicable legal order gives the taxpayer the option to choose several legal structures to achieve the intended economic objective, each of which will have a different tax dimension, the choice of the most advantageous tax solution cannot be regarded as circumvention.
Based on Article 199a Tax Ordinance the tax authorities may indicate that the activities of the taxpayer are apparent, but it is the general court that should confirm the existence or absence of a legal relationship or a law. The mere fact of the economic impact on the state budget should not affect the assessment of the transaction.
NSA rulings are issued on the taxpayer concerned and are not a common law. However, a case-law line may be established which will not only examine cases on the basis of a consistent declaration by the parties to the contract but also taking into account the economic consequences of the transaction.