The Ministry of Finance Warns Against Tax Optimisation Through Offshore Vehicles | SSW Tax Alert
On 12 June 2017, the Ministry of Finance issued another warning against the use of tax optimisation. This time, the warning concerns the use of companies formally registered abroad in case when they are actually managed from the territory of Poland.
The warning published on the website of the Ministry of Finance concerns specifically the case when Polish taxpayers (either natural or legal persons) engaged in business activity in Poland and generating income from the territory of Poland, transfer the place of business to another country in order to achieve tax savings. To this end, taxpayers register companies in the territory of a foreign country, even though such companies do not undertake any real business operations in that country, and any income they generate is meant to be subject to taxation exclusively in the territory of such foreign country.
In the opinion of the Ministry of Finance, other optimisation options with the use of offshore companies include:
- Registration of a company in the territory of a neighbouring country with a view to purchasing luxury or sports cars, or
- Other cases when offshore companies are actually managed from the territory of Poland and their registration abroad serves solely to create an appearance that the activity carried out through them is not subject to taxation in Poland.
According to the Ministry, when a foreign company, formally registered abroad, actually has its management board in Poland, according to the tax regulation it is subject to taxation in Poland with respect to all income it generates.
In the opinion of the Ministry of Finance, the above principle applies to the accounting of foreign companies also in the period before the effective date of the tax avoidance clause (i.e. prior to 15 July 2016).
In its warning, the Ministry of Finance indicates a number of circumstances which explain the absence of the management board of a foreign company in the country of its official place of business. The Ministry of Finance also underlines that in the course of potential audits, the following factors may be taken into account by tax authorities:
- relevance/purpose of the creation of an offshore company by the taxpayer (e.g. the initiative originated from legal or tax advisor and there was no business rationale for the foundation of the company);
- form of company acquisition (e.g. use of so-called shelf companies);
- scope of business (e.g. completion by the offshore company of a single transaction only, or one type of transactions, with the related decision(s) being taken in Poland).
The entire content of the warning is published here.
Should you be interested in the verification of your offshore companies in terms of the possibility of their effective place of management being reassessed by the tax authorities to Poland, please do not hesitate to contact us.
Patrycja Goździowska, Partner, Tax Advisor
Tomasz Wickel, Partner, Attorney at Law