The Entrepreneurs' Law Act and changes in relations with tax authorities

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On April 30, 2018, the Act of March 6, 2018, Entrepreneurs' Law entered into force. This is the most important act included in the so-called Of the Business Constitution and replaced the Act on the freedom of economic activity that had been in force so far. The new act aims to improve relations between entrepreneurs and offices to be more friendly, by introducing, inter alia, the presumption of business integrity or the principle that what is not prohibited by law is allowed.

What is not prohibited by law is permitted

In art. 8 of the Entrepreneurs' Law Act specified that “The entrepreneur may take any action, except for those prohibited by law. An entrepreneur may be obliged to behave in a specific manner only on the basis of legal provisions ". This principle also results from the Constitution of the Republic of Poland itself. In art. 22 specified that "Restriction of the freedom of economic activity is allowed only by statute and only because of important public interest".

Therefore, the entrepreneur can freely choose the methods and means to achieve business goals, as long as they do not conflict with the law. On the part of the legislator, however, there is an appropriate, clear specification of legal acts. The provision from the new act sounds a bit like a pick for entrepreneurs to look for loopholes in the regulations.On the other hand, tax authorities should not look at taxpayers in this way, bearing in mind another principle described below.

The entrepreneur's right and the presumption of his honesty

Public administration bodies are to be guided in their activities by the principle of trust in the entrepreneur, assuming that he acts in accordance with the law, honestly and with respect to good manners. This principle should first of all be reflected in the performed inspections or verification activities. Officials should not assume in advance the existence of circumstances that may have negative consequences for the entrepreneur (e.g. expelling expenses from costs and thus increasing the tax liability together with interest). Any irregularities should be supported by unequivocal evidence. This is related to another principle of resolving doubts in favor of the entrepreneur.

Entrepreneur's right for a friendly interpretation of the provisions

In art. 10 sec. 2 of the Entrepreneurs' Law Act, it was specified that: "If the subject of the proceedings before the authority is to impose an obligation on the entrepreneur or to limit or withdraw the right, and in this respect there are doubts as to the facts, the authority resolves them in favor of the entrepreneur".

Thanks to the above principle, cases where the decisions of cases to the detriment of entrepreneurs were made on the basis of ambiguous evidence are to be eliminated. However, for safety reasons, this rule has been subject to additional provisions that this provision does not apply if:

  • entities with disputed interests participate in the proceedings or the result of the proceedings has a direct impact on the interests of third parties,

  • separate provisions require the entrepreneur to prove certain facts,

  • it is required by important public interest, including essential interests of the state, in particular its security, defense or public order.

Entrepreneurs' law - the principle of proportionality

Pursuant to Art. 12 of the Entrepreneurs' Law, "The authority conducts the proceedings in a way that inspires the confidence of entrepreneurs in the public authority, guided by the principles of proportionality, impartiality and equal treatment". This means that the tax authorities can only take actions that are proportional to the intended purpose.

An example is the carrying out of checking activities in which officials should request only such documents that are actually required by law in a given case. In practice, this means that a natural person running a business should not be required to present, for example, evidence in the form of PZ warehouse documents confirming the purchase of commercial goods or auxiliary materials, as they are not required by law to collect this type of documentation.

Increase legal certainty

Another rule is that "The authority does not depart from the established practice of resolving cases in the same factual and legal status without just cause" (Article 14 of the Entrepreneurs' Law). This provision should reassure entrepreneurs who find it more and more difficult to find their place in the complexities of tax regulations. Their ambiguity often causes doubts that require individual interpretations. On this basis, a consolidated interpretative practice is created.

An entrepreneur who decides to conduct their own accounting does not have to apply for an interpretation of tax regulations in every doubt, if there is already established practice in this area. The new rule should provide him with comfort when making business decisions faster.

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Spokesman for Small and Medium Enterprises

An additional aspect of the introduced changes is the appointment of the Ombudsman for Small and Medium Enterprises. In art. 16 sec. 1 of the Entrepreneurs' Law Act, a short provision appeared that "The rights of micro, small and medium-sized enterprises are guarded by the Ombudsman for Small and Medium Enterprises". However, the tasks that belong to it are described in a separate act. His competences will include:

  • issuing opinions on draft legal acts concerning the interests of entrepreneurs and the principles of starting, performing or terminating economic activity in the territory of Poland,

  • assistance in organizing mediation between entrepreneurs and public administration bodies,

  • cooperation with non-governmental, social and professional organizations, whose statutory goals include the protection of entrepreneurs' rights,

  • initiating and organizing educational and information activities related to the performance of business activities in Poland, in particular in the field of entrepreneurship and economic law,

  • applying to competent authorities with requests to undertake a legislative initiative or to issue or amend other normative acts in matters relating to business activity,

  • applying to the competent authorities for issuing legal explanations if the provisions being the subject of the application raise doubts in practice.

The Entrepreneurs' Law Act specifies and develops the principles derived from the Constitution of the Republic of Poland. So the question is whether it was really necessary to transfer them to the law? In a study with an overview of the changes from the so-called Of the Business Constitution, the Ministry of Entrepreneurship and Technology indicated that, first of all, entrepreneurs need "their" law, in which they are familiar with specific regulations. Secondly, thanks to this, these rules will have a direct impact on the practice of operation of public authorities, which should be reflected in the improvement of relations with entrepreneurs.