Tax benefits with an aggressive optimisation character and derived between 15 July and 31 December 2016 are illegal. They are not afforded protection.

Individual interpretations issued before the entry into force of the anti-tax evasion clause (15 July 2016), providing tax benefits from 1 January 2017, do not protect taxpayers. This is set out in the Act of 29 November 2016 on amending the Personal Income Tax Act, the Corporate Income Tax Act and the Act on amending the Tax Law and certain other acts (Journal of Laws of 2016, item 1926).

Therefore, a question arises as to whether interpretations issued between 15 July and 31 December 2016 are afforded such protection. As stated by Piotr Liss, a tax consultant and partner at RSM Poland, one may interpret the new law in such a way that any benefits derived between 15 July and 31 December 2016 were allowed, even if they have an aggressive optimisation character. We asked the Ministry of Finance and our experts whether such an interpretation is justified.

(…)

Expert’s opinion

Marta Ignasiak, tax consultant at FKA Furtek Komosa Aleksandrowicz

The interpretation made by the Ministry of Finance is to a large degree consistent with applicable laws. It should be remembered that the amending act of 29 November 2016 amends not the Tax Law but the amending act of 13 May 2016. Although such practice is not right, it has not been challenged so far. Both amendments clarified transitional provisions which enable tax authorities to deny protection to taxpayers who complied with individual interpretations under circumstances indicating tax evasion or an abuse of rights in the context of VAT.

Under the amending act of 13 May 2016, such denial may apply to taxpayers who complied with interpretations issued since 15 July 2016. However, under the amended regulations of 29 November 2016, the denial may also apply to any taxpayers who complied with earlier interpretations, issued before 15 July 2016, if their tax benefit is derived after 1 January 2017.

This does not automatically mean that it was legal to derive benefits from tax evasion or an abuse of rights in the context of VAT, even if those benefits had the character of aggressive optimisation, between 15 July and 31 December 2016. In such cases, authorities may apply Article 119a of the Tax Law, stating that an action aimed at tax evasion is ineffective for tax benefit purposes.

However, these provisions do not affect the extent of protection afforded to taxpayers under Article 14k–14n of the Tax Law. This means that a taxpayer who obtained an interpretation before 15 July 2016 and complied with it to successfully derive a tax benefit before the end of the year is entitled to the protection provided for in the Tax Law, even if the benefit is inconsistent with the purpose of a tax act and the taxpayer acted in an artificial manner. In particular, such a taxpayer should be released from the obligation to pay the tax and there should be no criminal tax proceedings against him or her.

Edited by: Łukasz Zalewski (DGP)