Starting from January 1, 2019 regulations imposing the obligation of reporting the so-called tax schemes came into force. They are included in the new chapter 11 A, added to the Tax Code - Information on Tax Schemes (Articles 86a - 86o). The new regulations constitute the implementation of the Directive 2018/822 of May 25, 2018, (the so-called MDR Directive).
What is a tax scheme
In general, tax schemes are taxpayers' actions aimed at broadly understood tax optimization involving the use of legal, organizational and financial mechanisms aimed to reduce, eliminate or delay the arising of tax liabilities. The legal structure of the rules on schemes is complicated. The legislator uses a series of intricate terms that should be used together when defining specific obligations regarding schemes reporting. An important issue is therefore the correct determination of what a tax scheme is in specific circumstances and what should be properly reported to the tax authorities. The legislator uses the concept of arrangement, ie. activities or a set of related activities, including those having the character of a plan (intention, idea), when the taxpayer is their party and/or they may affect the tax obligation. Not every arrangement will be a tax scheme, but only those that additionally meet certain requirements set out in the new regulations.
Basically, the tax scheme will be an arrangement if:
- Its main purpose is to obtain a tax advantage (e.g., non-arising or postponing the tax liability during the creation of the tax liability, overstating the tax loss),
- when the circumstances of a given project show that a reasonably operating entity with different goals than obtaining a tax advantage could choose a different course of action to achieve a given economic objective,
- when it meets the general recognition criterion (e.g. the entity proposing certain projects is entitled to receive remuneration in the amount depending on the value of the tax advantage or the arrangement assumes a change in the classification of income to another source of income, etc.).
The above mentioned circumstances should appear jointly.
Types of schemes
The new rules provide for three types of tax schemes:
- a "general" scheme, which applies in principle to projects carried out only with the participation of domestic entities (scheme other than cross-border),
- a cross-border scheme in which there is an international element, i.e. at least one transaction participant is associated with another EU country or third country,
- a standardized scheme that can be applied or made available to more than one tax payer (user) without having to change the essential assumptions of the arrangement.
It should be noted that in the case of schemes other than cross-border (schemes concerning domestic projects), only the schemes in which the entity (user) fulfills the specific conditions of a financial nature mainly (e.g. the income or costs of the balance sheet of this entity exceed the value of EUR 10,000,000 or the project concerns things or rights with a value exceeding EUR 2,500,000). Such regulation significantly limits the obligation to report in case of domestic projects. However, the above mentioned restriction does not apply to cross-border schemes.
Tax schemes are subject to reporting to the Head of the National Tax Administration in electronic form via the portal: https://mdr.mf.gov.pl/#/ The reporting obligation lies with three entities:
- promoter - an entity creating and offering arrangement and making it available to others or implementing it for a taxpayer, in particular a tax advisor, legal advisor and attorney-at-law,
- user - the entity to which the arrangement is made available or which implements it in its own activity (basically the taxpayer),
- supporter - an entity assisting, supporting or providing advice on creating, sharing, implementing or supervising the implementation of the arrangement in the user’s activity (in particular, the statutory auditor and notary public).
The promoter is obliged to report in the first place. However, the promoter performing the profession of public trust may be exempt from the above mentioned duty due for the protection of professional secrecy. Subsequently, the reporting obligation lies on the user and the supporter.
A large promoter
In addition to reporting tax schemes, the legislator also provided for a different obligation - creating an internal procedure to prevent from avoiding informing tax authorities about tax schemes. This obligation applies to entities that provide advisory services to other persons that may result in the creation of tax schemes when the income or balance sheet costs of these entities exceed PLN 8,000,000.
Violation of duties related to reporting tax schemes may result in fiscal penal liability - a fine of up to 720 daily rates (up to PLN 20,160,000 maximum). In the absence of creation by the so-called a large promoter of the above internal procedure, a fine may be imposed on him up to PLN 2,000,000. For a natural person who, acting for a large promoter, did not fulfill the obligations related to the creation of the above mentioned procedure was convicted with a verdict for this reason, an additional fine of up to PLN 10,000,000 may be imposed.
The information obtained by the tax authorities is to collect data on taxpayer activities, in particular concerning aggressive tax planning or abuses associated with such planning. The Ministry of Finance declares that the new regulations may discourage taxpayers and their advisors (proxies) from implementing measures aimed at tax avoidance.