The circumvention clause operates in the Polish tax system from 15 July 2016 This is undoubtedly a powerful tool in the hands of the tax authorities, which allows tax authorities to change the legal qualifications of economic events.
By using it, the tax may reclassify the activities of the taxpayer, indicating that under the circumstances one another activity has actually been carried out, and it can also deny the taxpayer tax advantages, considering that the activity was carried out without economic justification.
Consequently, this may form the basis for applying the general standard and determining the tax to be paid. On the other hand, if the taxable person can demonstrate the existence of an economic justification for his activity, generally the tax authorities will not be entitled to use the anti-tax avoidance clause.
The indication ‘generally’ means that it may also happen that, although the taxpayer has demonstrated the existence of an economic justification for the actions taken, the tax authorities may attempt to apply the general clause on the basis of other conditions, such as demonstrating that the measure in question was primarily aimed at obtaining a tax advantage.
So how has the tax authorities' approach to taxpayers' settlements changed since they had such a powerful tool?
Following the noisy announcements of the introduction of the clause and over a year and a half of its validity, it should be noted that so far no spectacular cases of its use have been recorded in practice.
To date, there is no information that the tax authorities will publish though one a decision based on an anti-law clause, and the main indications of its validity are reflected in refusals to give individual interpretations on grounds of reasonable suspicion that elements of the facts or future events constitute avoidance of taxation.
The refusal to give interpretations concerned, among others, issues such as the consequences of the donation, the effects of the company's transformation and the effects of the report.
Given how much interference with taxpayers' settlements is possible by the clause introduced and the expected profit tax incentives in this respect, it seems that the tax authorities have, however, taken care to apply this tool. Let us hope that this trend will continue and the clause will not be used to settle disputes in favour of tax authorities.
According to the data published by the Ministry of Finance, 2017 Whereas the anti-tax avoidance clause may apply, Director KIS refused to give interpretation 650 times.
Given how much interference with taxpayers' settlements is possible by the clause introduced and the expected profit tax incentives in this respect, it seems that the tax authorities have, however, taken care to apply this tool.
Let us hope that this trend will continue and the clause will not be used to settle disputes in favour of tax authorities.
At the same time, it should be noted that in the event of such a dispute, the taxpayer has certain rights which he is able to effectively pursue.
An example can be used first judgments of the Provincial Administrative Courts, which, in most cases, issued on the basis of the provisions on refusal of interpretation, confirmed the views of taxpayers.
For example – WSA in Krakow confirmed that the subject of an individual interpretation may be a question of the protective power of interpretation in the case of the use of a clause.
On the other hand, the WSA in Gdańsk considered that the authority issuing the individual interpretation was not competent to comment whether a clause procedure would be applied in a particular factual condition.
Author:
Rafał Dąbrowski
Senior Manager in Tax Advisory. Lawyer, tax advisor, restructuring advisor. At Russell Bedford in charge of the Department of Tax Advisory. From 2011 It provides advice to leading companies from various sectors of the economy. In particular, he specializes in consulting the steel, fuel, construction, transport, real estate and IT industries. Speaker of conferences and training on tax law. Author of numerous tax-related articles published in the industry press.