Amendments to the anti-tax avoidance clause

Draft Act amending the Act – Tax Ordinance and some others Act dated 23 December 2014 (hereinafter referred to as the Draft Act), which is currently under development, includes, inter alia, the so-called anti-tax avoidance clause. In the current shape of the Draft Act under Article 1(93) Adds Chapter IIIa entitled ‘Anti-tax avoidance’.

According to the draft law, tax avoidance ‘is the application, on an intentional basis, of an artificial legal structure the main purpose of which was to obtain, unforeseeable in tax legislation and contrary to the purpose and substance of those provisions, a significant tax advantage by the entity creating or co-creating the artificial legal structure’ 1.

The bill also defines what artificial legal design is. The legal structure is considered artificial, ‘if:

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is overly complex, as manifested in:

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• division one events or combining different events, or
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• implementation of the structure by intermediaries, or
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• performance in the design of components leading to a condition identical to or similar to that existing before the application of the legal structure, or
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• performance in the design of the mutually reinforcing or compensating components, and
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no economic content:

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• concealing the true purpose and importance of the economic event, or
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• without leading to any economic event, or
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• being inadequate or unnecessary to carry out an economic event, in accordance with its purpose and substance and to achieve the intended economic effect

For these reasons, it should be assumed that it would not be applied by an entity acting reasonably and legally and pursuing its economic objectives in its elections."[2].

In the following part, there is also a definition of a significant asset benefit which can be obtained by the taxpayer. A significant asset benefit, ‘is:

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• reducing or avoiding the tax liability or increasing the amount of overpayment, refund or loss, or
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avoidance of tax obligation, reduction of the tax base on the liabilities in question under Article 21(1)(2) or withdrawal at the time of the tax obligation resulting in a reduction in the amount of the tax liability, avoidance of that obligation or an increase in the amount of overpayment, refund or loss

Of a height exceeding 50,000 PLN for the tax year or other accounting period’[3].

The anti-tax avoidance clause creates a lot of controversy. However, given that the bill has not yet been addressed to the Sejm, it is hoped that changes will be made.

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