Anti-Tax Avoidance Clause

_{5. July 2016}
 

The President signed into law the Act Amending the Tax Act and Certain Other Acts (“the Amending Act”, Journal of Laws of 2016, item 846) on 7 June 2016.

One of the novelties introduced by the lawmakers is the anti-tax avoidance clause. The purpose of this clause is to prevent fictitious transactions that taxpayers carry out primarily to achieve tax advantages. Practically speaking, this means transactions which are hardly justifiable from an economic or business point of view.

The Amending Act lists sample features that suggest a fictitious character of the taxpayers' actions, such as unreasonable split of transactions, involvement of intermediaries where there is no economic or business reason for doing so, transaction structuring leading to an identical or similar situation as before the transaction, structures cancelling or offsetting each other, or high risks incommensurate to potential benefits other than tax advantages.

The Amending Act also refines the term “tax advantage”. Thus, a tax advantage means avoidance, deferral or reduction of a tax liability; creation or overstatement of a tax loss; creation or overstatement of a tax overpayment or a tax reclaim amount. The legislation sets a threshold (PLN 100,000) which, if exceeded, entitles tax authorities to invoke the anti-tax avoidance clause.

Reading the new regulations one cannot help but conclude that the practical application of the clause will boil down to the tax authorities claiming that a transaction has different tax consequences than the taxpayer intended or that it is legally void.

However, taxpayers will be allowed to apply to the Head of the National Tax Administration for a so-called business clearance.

According to the Amending Act the anti-tax avoidance clause also applies to tax consequences arising after its entry into force even if the transactions that brought about those consequences took place before the clause's effective date.

In this context, we believe it would be worthwhile reviewing the tax planning solutions in your company or modify your contemplated business ventures. To this end, the economic and business circumstances of your transactions need to be thoroughly examined.