General anti-avoidance tax rule is ever closer – amendment adopted by Parliament | Tax Alert 3/2016

On 13 May 2016, the Polish Sejm adopted an amendment to the Tax Ordinance Act and introduced a general anti-avoidance rule (“GAAR”) into the Polish tax system. On 19 May 2016, the Senate did not propose any modifications to the amendment adopted by the Sejm.

Two crucial transitional provisions

1. In light of the amendment as adopted by the Sejm, the GAAR will apply to tax advantages that accrue following the date on which the amendment entered into force. An earlier version of the amendment, which was discussed in the Sejm, referred to “actions performed after the amendment has entered into force”. This would have meant that restructuring projects aimed at improving tax efficiency would, on the condition that they were fully completed before the amendment entered into force, have fallen outside the scope of the GAAR. However, as things currently stand, even if a restructuring project was completed prior to the commencement date of the GAAR, it may still attract the attention of the tax authorities.

2. Under the current wording of the amendment, those provisions which entitle the Minister of Finance to refuse to issue an individual tax ruling regarding transactions that seek to avoid taxation will not apply, provided that the application for a tax ruling was filed before the amendment entered into force. This amendment is beneficial for taxpayers since, in the earlier wording of the amendment, the Minister of Finance could refuse to issue a tax ruling even if the application had been filed before the entry into force of the amendment, provided that the three-month deadline for issuing the tax ruling would have fallen after the date of the amendment’s entry into force.

Things to consider before restructuring

In light of the above amendment, when planning a restructuring project it is advisable to:

• be prepared to prove, if necessary, other non-tax arguments to justify implementation of the restructuring;
• evaluate which elements of the restructuring should be secured by individual tax rulings and apply as soon as possible for any rulings which are necessary.

Taking swift action in this regard may increase the possibility of receiving individual tax rulings prior to the entry into force of the GAAR. In turn, this may reduce the risk that the Minister of Finance refuses to issue rulings, pursuant to the GAAR. 

At the present moment, the amendment awaits the signature of the President of Poland.

Authors

Patrycja Goździowska, Partner, Tax Advisor SSW

Tomasz Wickel, Partner, Legal Counsel, Tax Advisor SSW