Tax schemes – new reporting obligations
The beginning of this year saw the introduction of a new, and giving rise to much controversy and considerable concerns of the taxpayers and entities cooperating with them, institution – tax scheme reporting obligation (MDR – Mandatory Disclosure Rules).
The changes result from a partial transposition of an EU directive. However, the Polish legislator seems to be ahead of other Member States as regards the scope of the implemented changes. Previously, the tax scheme reporting obligation only existed in Great Britain. It should also be noted that Poland has gone far beyond the obligations imposed by the directive. The latter only provided that Member States adopt relevant regulations requiring that the tax authorities be informed about cross-border tax-planning schemes whereas the Tax Code now contains an obligation to report domestic schemes as well. In addition, an obligation has been imposed on certain groups of entities to implement and apply a special procedure preventing failures to comply with the obligations imposed by the statute.
The changes have been justified by the necessity of access to the information concerning actions undertaken by taxpayers in the area of potentially aggressive tax planning. They are to enable the tax authorities to respond quickly in the form of legislative amendments, and ultimately, of course, result in tighter tax system.
In justifying the amendments, the legislator, somewhat comfortingly, tries to convince us that taxpayers will accrue certain benefits from them as well as the new fiscal instrument is expected to result in fewer tax audits as a consequence of their aims being precisely defined and taxpayers to be audited being carefully selected on the grounds of the information received.
What then should the revenue administration be informed about?
Let us now move on the heart of the matter and attempt to answer a fundamental question – what is to be reported in the first place?
The head of the KAS (State Revenue Administration) must be informed about a so-called arrangement that constitutes a tax-planning scheme. This involves an action or a series of related actions (including planned ones), to which the taxpayer is at least one party and/or which have or could have impact on the existence or non-existence of a tax obligation. It further must have certain distinctive features specific to each kind of scheme.
In order for an MDR obligation to arise, the tax-planning scheme must be shared or implemented. Moreover, in the case of a domestic scheme, it must also meet the condition of a qualified beneficiary. This is to be understood as exceeding certain amount thresholds: EUR 10 million in revenue or costs, EUR 2.5 million for in the case of the value of the subject of the arrangement. Such thresholds will be exceeded also where the beneficiary is an entity related to an entity exceeding such thresholds.
A tax-planning scheme must not be associated with a necessary actual tax benefit. Its presence will not always mean that the arrangement in question is a tax scheme and hence is subject to the reporting obligation. Similarly, a lack of a tax benefit does not automatically mean that the scheme is exempt from the reporting obligation.
Who and when is required to report?
The legislator lists three categories of entities that may be required to provide the information: the promoter, beneficiary and supporter. The reporting rules and the scope of information to be disclosed vary depending on the function performed in the process of scheme implementation or sharing, and also on its type. It should be noted that the obligation has not been imposed on specific professional groups, but rather on persons performing certain functions.
The single information sharing rule applies, and the obligation is sequentially passed on among the entities involved in a given transaction. Thus, who is obliged to provide relevant information to the Head of KAS depends inter alia on whether or not the promoter (e.g. a tax advisor) is covered by the legally protected professional secrecy or has been released from such secrecy by the beneficiary (e.g. his/her client-taxpayer).
As a rule, the scheme reporting deadline is 30 days of the day following it being shared, prepared for implementation or execution of the first action relating to its implementation, depending on which occurs earlier.
It is worth noting the retrospective character of the amendments. The reporting obligation also covers situations where the first action relating to the implementation of a scheme took place following 25 June 2018 (in the case of cross-border tax schemes) or following 1 November 2018 (in the case of domestic schemes).
A delay in the performance of the reporting obligation will not entail adverse consequences to the obligated entities provided that the obligations will be performed by the end of February 2019. On the other hand, reporting overdue schemes between 1 March 2019 and 30 April 2019 will be deemed as minor cases.
The Ministry of Finance has published extensive guidelines for the application of the new regulations. However, they do not clarify all doubts. These concern mainly the manner of allocation of specific transactions to the relevant tax scheme categories.
Ewa Pyrkosz, Tax Consultant, ATA Tax Sp. z o.o.
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