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Changes in tax avoidance – „Polish Order”

The year 2022 is a key year for changes in the tax system, i.a. due to the fact that the Polish Order introduced, i.a. amendments to the provisions in the Tax Ordinance regarding tax avoidance provisions. As indicated in the justification, the modification of the existing regulations is aimed primarily at tightening the tax system while preventing the use of the regulations to avoid taxation. The proposed changes may significantly contribute to the tightening of the hitherto stance of tax authorities towards the taxpayer. Probably, these changes result from the experience gained over the recent years in this matter and the development of certain practices.

Let us remind that in accordance with the current Article 119zfb of the Tax Ordinance, the Head of the National Tax Administration refuses to initiate proceedings:

  1. With respect to those tax benefits which, on the date of filling the application, may be the subject of pending tax proceedings, tax inspection or customs and fiscal inspection, the possibility of which was notified to the taxpayer pursuant to Article 282b §1, or when in this respect the case has been resolved as to its merits in a decision or order of the tax authority;
  2. If the position included in the application indicates the legitimacy of issuing a decision on the basis of Article 119zfi §1 or 2.

Polish Order currently introduces some modifications to this provision and also focuses on new tools that will assist in the fight against tax evasion.

Amendments and their consequences

Referring to the changes, it should be pointed out that, pursuant to Article 71 of the Polish Order, Article 119zfb point 1 of the Act amended in Article 7, indicates that, in the wording given by this Act, it also applies to applications for a decision determining the conditions for withdrawal of tax avoidance submitted and not examined.

In addition, Article 119zfb (1) has gained a new, clarifying statement. However, what does it actually mean and what consequences does it have?

As we read in the justification of the draft: ‘The change in the provision of Article 119zfb (1) of the Tax Ordinance is caused by the necessity to include payers in the scope of the provision in question (in connection with the possibility of questioning the tax benefit obtained in connection with the transaction in which the payer appears), so the current reference only to taxpayers remains too narrow’.

The modified regulation clarified that the condition blocking the initiation of proceedings is also the notification of the intention to initiate a tax audit related to tax benefits. The wording of this regulation may have inaccurately indicated that already initiated tax audits are not covered. Therefore, the introduced changes strengthen the position of the Head of the National Fiscal Administration regarding the interpretation of the existing regulation.

Thus, the changes introduced by the Polish Order focus on clarifying the currently existing regulations. However, there are also those which have a key impact on the given circumstances of taxpayers. For example, the changes are also to apply to the refund of tax overpayment. Polish Order introduces separate rules for interest on the refund of overpayment. This situation is to apply when in the application for a statement of overpayment the conditions from Article 119g §1 of the Tax Ordinance were noticed and the relevant tax authority was not designated to assess this circumstance.

In the presented changes it may be noted that some privileges were taken away from the taxpayer as evidenced by the above analysis. There is no doubt that some of the changes are disadvantageous for taxpayers. On the other hand, the tax authorities will certainly have greater control over the process of verification of the detected tax avoidance mechanism.