The clause against tax avoidance - effects

Service-Tax

This year, an amendment to the Tax Ordinance Act, which introduces a tax evasion clause, entered into force. Along with the clause, a number of other new concepts were introduced that affect the correct application of these provisions (including tax advantage, artificial operation, appropriate activity, etc.). What is tax avoidance and what are the effects of the so-called clause against tax avoidance?

Tax avoidance - definition before and after the changes

The Tax Code introduces the official definition of tax avoidance. Previously, this concept was not defined directly and should be understood as tax optimization, i.e. legal action, and sometimes a series of consecutive activities aimed at minimizing the tax burden. It should be emphasized here that any such attempt was to be made by means permitted by law.

Attention!

Tax avoidance must be distinguished from tax evasion. Tax evasion is prohibited by tax law and is treated as a crime. More precisely, it is misleading the state, deliberately acting to the detriment of the Treasury and, as a result, illegal reduction of the tax burden (e.g. issuing empty invoices).

A taxpayer who evades tax is exposed to criminal or penal fiscal liability in connection with non-payment of the tax that should have been paid in the given circumstances.

Pursuant to Art. 119a paragraph. 1 of the Tax Ordinance, tax avoidance is an activity (or a series of different activities between various entities) performed primarily in order to achieve a tax advantage, contrary to the subject and purpose of a provision of the act in given circumstances. If the way the taxpayer operated was artificial, this activity does not result in gaining benefits.

Attention!

The tax benefit is:

  1. Tax liability failure;

  2. Postponing the emergence of a tax liability or reducing its amount or creating or overstating a tax loss;

  3. Creation of an overpayment or right to a tax refund, or an increase in the amount of the overpayment or tax refund.

An activity is considered to be undertaken primarily for the purpose of obtaining a tax advantage, when its other economic or economic goals indicated by the taxpayer should be considered as insignificant.

So what is meant by "artificial mode of operation"? This concept is explained in Art. 119 c of paragraph 1. 1. It is a way of operating a taxpayer which would not be applied if he had acted reasonably, pursuing a lawful purpose other than obtaining a tax advantage. In particular, according to the act, such actions will be considered:

  • unjustified splitting of operations,

  • engaging intermediaries without economic or economic justification,

  • elements leading to obtaining the state identical or similar to the state existing before the activities were performed,

  • mutually canceling or compensating elements,

  • undertaking activities where the economic or economic risk exceeds the expected benefits.

Tax effects of tax avoidance after the changes

If the activity is considered to be tax avoidance, the tax consequences will be determined as if the taxpayer made the so-called appropriate activity. An appropriate action, on the other hand, is an action that the entity would have performed if it had acted reasonably and was guided by lawful goals, but other than gaining benefits.

The clause against tax avoidance and the new authority and competences of the Minister of Finance

The legitimacy of issuing a decision on tax avoidance in individual taxpayers' cases is assessed by the newly established Tax Avoidance Council as an independent body. Another novelty is the competence of the Minister of Finance to issue the so-called a protective opinion that allows taxpayers to obtain a position on planned or already undertaken transactions to which the introduced anti-avoidance clause may potentially apply.

The security opinion is issued at the request of the taxpayer. As a result, a protective opinion will be issued, in which it will be stated whether the activity does not lead to tax avoidance.

Important!

The application for a security opinion is to be subject to a fee of PLN 20,000, which must be paid within 7 days from the date of submission of the application.

When is the tax evasion clause not applied?

The anti-tax avoidance clause shall not apply:

  • if the tax benefit or the sum of tax benefits achieved by the entity on account of the activity does not exceed PLN 100,000 in the reporting period, and in the case of taxes that are not periodically settled - if the tax benefit on account of the activity does not exceed PLN 100,000;

  • to the entity that has obtained the security opinion - to the extent covered by the opinion, until the date of delivery of the revocation or amendment to the security opinion;

  • to an entity whose application for a safety opinion has not been dealt with within the time limit referred to in Art. 119zb (i.e. within 6 months from the date of receipt of the application by the Minister of Finance) - in the scope covered by the application, until the date of delivery of the amendment to the security opinion;

  • to the tax on goods and services and to fees and non-tax budgetary receivables;

  • if the application of other provisions of the tax law allows counteracting tax avoidance.

Attention!

The anti-avoidance clause pursuant to the Tax Ordinance Act applies to personal income tax and corporate income tax.