Revolutionary changes in Polish Tax Law: Introducing a General Anti-Avoidance Rule
Starting from 15 July 2016, a new GAAR (General Anti-Avoidance Rule) clause will be introduced into the tax system in Poland. The new clause may have a significant impact not only on future transactions, but also on the transactions, restructurings and optimisations made in the past years if they result in a tax benefit after 15 July 2016.
General Anti-Avoidance Rule
The aim of the rule is to prevent taxpayers from taking actions which, although lawful, are only or mainly aimed at achieving a tax benefit. The important thing is that a tax benefit is understood not only as minimizing tax burdens but also as, for example, deferring a tax obligation.
The new law introduces a definition of tax avoidance, pursuant to which any action (agreement, restructuring process etc) that is carried out mainly for the purpose of achieving a tax benefit and which is considered by the tax authorities as artificial will not give the suspected benefit. An artificial action is understood as an action that is inconsistent, in the given circumstances, with the object and purpose of a provision of the tax law. Additionally, it is as an action which normally would not be taken by the taxpayer, if there were no tax benefits resulting therefrom.
The rule will apply to transactions under which a tax benefit (or the sum of benefits) in a given settlement period is at least PLN 100,000. It will not apply to VAT-related matters (the Amendment provides for a separate ‘VAT clause’ that has been introduced directly to the Value Added Tax Law).
The GAAR is to be applied to any benefits gained after 15 July 2016. This means that all optimisation transactions made in the past in respect of which tax consequences (e.g. payments or depreciation write-offs) will take place after July 15, 2016 may be questioned by tax authorities. Therefore, all transactions of an ‘optimising’ or restructuring nature should be verified to confirm whether they may be subject to the GAAR. In particular, all of the ‘step-up’ optimisations (aimed at increasing the initial value of fixed assets) or the M&As; within the group made in the past should be verified with the utmost diligence.
Actions to be taken
From this perspective, it is recommendable to analyse those of the past transactions which were performed for the purposes of tax savings and prepare argumentation against the application of the GAAR. At the same time, it is also worth considering to verify individual binding rulings obtained in the past in order to confirm whether they cover all aspects of the actions taken and secure the taxpayer’s tax settlements.