The Act introducing a clause against tax avoidance [a general anti-avoidance rule - GAAR] comes into force within 30 days after its publication, likely in July 2016.
The most important feature of GAAR is the right given to the Ministry of Finance to deny, in tax computations, an artificial arrangement(or series of arrangements) with tax savings as its principal purpose if the tax savings are not compliant, under the circumstances of the case, with the provisions and purpose of tax laws.
Arrangements investigated under GAAR shall be compared to arrangements that could be made by a reasonable taxpayer following fair market goals and these comparative arrangements shall form the basis to assess tax consequences for a taxpayer.
GAAR shall be applicable with regard to tax savings achieved after its entry into force – regardless of the actual moment of the transaction.
Retroactive use
It means that GAAR may be used retroactively with regard to undertakings or arrangements that were made before its introduction but the effects of which extend to the present (e.g. a tax loss generated through past events that is settled in present tax returns or depreciation write-offs regarding assets acquired in the past).
Taking the above into consideration, all arrangements that result in ongoing tax savings, including those made before the introduction of GAAR, must be thoroughly reviewed in the context of GAAR.
It is important to note that tax-saving arrangements, if deemed artificial by the Ministry of Finance, may no longer be protected by ordinary tax rulings.
A taxpayer concerned with GAAR may request for a special safeguarding tax ruling from the Ministry of Finance. The ruling shall be issued within six months. The fee for one ruling is approximately €5,000 ($5,650). The ruling is binding for the tax authorities, however, the ruling may be changed by Ministry of Finance if it is in contrary with the verdicts of the Constitutional Tribunal or the European Court of Justice.
Artificial arrangements
The following arrangements may be considered as artificial (which does not exclude other arrangements from possible investigation under GAAR):
a. operations unreasonably divided; or
b. intermediaries unreasonably involved; or
c. transactions resulting in a situation similar to the one prior to the arrangement (looping); or
d. transactions consisting of mutually nullifying or compensating elements; or
e. arrangements connected with a business risk exceeding the expected benefits (other than tax savings) to the extent that one must consider a reasonably acting person not to have chosen this course of action.
GAAR will be applicable to tax savings exceeding approximately €25,000.
GAAR shall not be applicable to VAT, but by virtue of a special, separate provision, the GAAR effect shall be extended to VAT issues under the rule of law abuse, enabling tax authorities to deny VAT effects of artificial arrangements.
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By Justyna Bauta-Szostak, partner, legal and tax advisor in MDDP at Michalik Dłuska Dziedzic & Partners |
