Wednesday, 14 September 2016

Polish GAAR and VAT anti-abuse rule now in effect

A general anti-avoidance rule (GAAR) and a VAT “abuse of law” rule (introduced by two new laws that amend the Polish Tax Ordinance Act and the Polish VAT Act, respectively) became effective on 15 July 2016. The new rules may have a significant impact on future activities of entities and individuals subject to Polish taxation, and the GAAR may apply to certain prior activities that result in tax benefits after 15 July 2016. The key measures of the new rules and their effect on the Polish tax ruling system are described below.
The new GAAR is designed to prevent the creation and use of artificial legal arrangements, with little business justification, to avoid the payment of tax in Poland. Under the new rules, in the case of “tax avoidance” situations, the Polish tax authorities generally will have the power to disregard the form of a transaction/action and determine the tax consequences in a way that eliminates the effects of the tax benefits obtained (i.e. as if the “tax avoidance” was never in place).
Tax avoidance is considered to occur where a transaction/action is carried out primarily to obtain a tax benefit that, under the circumstances, is inconsistent with the subject and purpose of a provision in the tax legislation, and the transaction/action is carried out in an “artificial” manner.
The GAAR will apply only to transactions/actions from which the tax benefit (or the sum of tax benefits) obtained by a person after 15 July 2016 exceeds PLN 100,000 in a settlement period (the period in which a given tax is settled, e.g. an annual basis for corporate income tax purposes); the amount is calculated per transaction/action in the case of taxes that are not settled periodically. The GAAR will not apply, inter alia, to VAT (separate rules included in the VAT Act are discussed below) or in cases where the application of other provisions of tax legislation operates to counteract tax avoidance. Additionally, as explained below, a protective opinion indicating that the GAAR does not apply in a particular case may be available from the Minister of Finance (MOF).

Source & more info: Deloitte