Wakacje składkowe to specjalna ulga dla przedsiębiorców w Polsce, umożliwiająca zawieszenie obowiązku opłacania składek na ubezpieczenie społeczne (ZUS) przez określony czas. Ma na celu wsparcie małych przedsiębiorców, którzy mają trudności finansowe, oferując im możliwość czasowego zwolnienia z płacenia składek.
Why insure tax risks?
For years, the Polish tax system has been regarded as one of the most complicated in Europe. Numerous and frequent amendments of laws and unclear regulations cause entrepreneurs to face many challenges, but also risks in terms of the correct application of tax law. Frequent changes in interpretation mean that even correct tax settlements might be the subject to dispute. Statistics of administrative courts confirm that the number of such cases is constantly increasing.
At the same time, tax authorities today have an increasingly wide range of analytical and control tools at their disposal. Thanks to sophisticated IT systems, they can compare data, identify irregularities and identify tax risks more easily than ever before.
In practice, this means an increase in the number of tax audits and more frequent questioning by the tax authorities of how transactions, even routine ones, are documented and settled.
In the face of such a dynamic and unpredictable legal environment, tax risk insurance is not only a form of protection against the potential consequences of erroneous settlements, but also a way to increase stability and peace of mind in the running of your business.
In particular, insurance can:
- eliminate potential transaction delays (e.g. where the alternative is to obtain an individual interpretation),
- help manage the allocation of potential tax risks in the absence of clear interpretive guidance from tax authorities,
- provide an alternative to compensation.
Who should consider insuring tax risks?
Tax risk insurance is a real protection – not only for the company, but also for the people who make key decisions in the area of finance and tax on a daily basis, in particular:
- Business owners and management,
- Chief Financial Officers,
- Accountants ,
- Employees in finance and payroll departments.
Which tax risks can be insured? Examples from practice
The range of tax risks that can be insured is very broad, so any activity that gives rise to tax risks can be analysed for insurability.
Below are examples of areas of activity and the accompanying potential tax risks that may be insurable.
Domestic and cross-border mergers and divisions, exchanges of shares
- lack of economic justification for the transaction
- questioning the neutrality of the transaction
- lack of marketability of transactions (in some cases)
Contributions
- reclassification of in-kind contribution of assets as contribution of a enterprise/OPE
- VAT tax base and tax obligation for tax on civil law transactions [PCC]
- continued depreciation of assets received
Real estate / share deals
- contestation of VAT deduction / obligation to pay PCC
- application of the real estate clause
Withholding tax (WHT)
- no genuine economic activity
- failure of the entity receiving payments from Poland to meet the definition of the beneficial owner
- failure of the boards of Polish paying companies to exercise due diligence on the WHT
- challenging the application of the exemption/reduced tax rate resulting from the double tax treaties
Financing and its restructuring
- inefficient determination of the financing structure
- understating or overstating the tax base
- VAT/PCC taxation of loans
- risk of free of charge benefits
Day-to-day tax settlements
- incorrect identification of the subject of taxation / understatement of the tax base for property tax (PON)
- carrying on activities involving a risk of tax permanent establishment
- risks in determining foreign controlled entity (CFC) status
- risks associated with the settlement by the holding company, the family foundation
- incorrect accounting for tax credits or preferential arrangements (R&D, PSI)
Transfer pricing (TP)
- gratuitous / partly gratuitous benefits between related parties / in groups (example: guarantees, including mutual guarantees, loans)
- use of non-market prices (in some cases)
- undermining the costs of intangible services when they are inadequately documented and lack evidence of their acquisition
Tax disputes and penalties under the Fiscal Penal Code
- the use of general clauses, such as, inter alia, anti-abuse clauses or additional sanctions
- criminal and fiscal responsibility of, among others, board members and financial officers
- joint and several liability of board members
PIT
- 50% tax deductible costs
- reclassification of B2B contracts with board members and managers
- reclassification of e.g. share-based incentive schemes
How can we help?
We provide tax support at every stage of obtaining tax risk insurance for both insurance companies and taxpayers who are considering risk insurance
Stage I – Identification of tax risks
- verification of tax issues and identification of risks that may be insurable,
- calculation of tax risks (potentially insurable amount).
Stage II – Legal and tax support during the insurance process
- participation in negotiations with the insurer,
- assistance in answering the questionnaire related to tax risk,
- verification of documents for tax purposes, including the content of the policy,
- preparation of a tax opinion / TP documentation if required by the insurer,
- preparation of a tax opinion, as well as ongoing advice to insurance companies on tax risks.
Benefits of tax risk insurance
Increasing the certainty and security of transactions
The tax policy mitigates the risk in the event that the tax settlements are challenged by the tax authorities, which translates into greater predictability and peace of mind in the implementation of key transactions (e.g. mergers, acquisitions, in-kind contributions or asset sales).
Protection of the board from personal liability
In situations where board members may face fiscal or financial criminal liability, insurance provides an additional layer of protection, building a sense of security when making tax decisions.
Improved negotiating position in M&A transactions
Those involved in transactions (buyers and sellers) can use the policy as a tool to limit liability for tax risks, often shortening the due diligence process and making the offer more attractive.
Reducing the risk of tax sanctions and penalties
The scope of protection may include not only the tax itself, but also interest, penalties and legal costs, so that the company does not bear the full burden of potential tax disputes.
Ability to avoid lengthy and costly disputes with the tax authorities
With insurance, potential claims can be resolved by the insurer, without the need for a lengthy court battle or blocking the company's financial resources.
Strengthening corporate governance and compliance
Having tax risk insurance is increasingly recognised as part of good risk management practice and can positively influence the perception of a company by investors, business partners or financial institutions.
Our experience
Examples of transactions and associated risks that we have supported with insurance on the tax side:
FAQ
What does tax risk insurance cover?
The scope of the insurance depends on the subject of the insurance. It can cover not only the tax amount, but also interest, tax penalties and sanctions, costs of defence before the tax authorities, as well as gross-up of the insurance paid.
How much does it cost to insure tax risks?
The amount of the insurance premium varies between 0.8% and 6% of the sum insured. In addition, a fee associated with the underwriting process of approximately €15,000-25,000 is charged before the policy is taken out.
For what period is insurance taken out for tax risks?
Most often, tax risk insurance policies are taken out for a period of six years, i.e. until the statute of limitations for a potential tax liability.
How long does it take to get insurance?
The process of obtaining insurance can take approximately 10-21 days from acceptance of the offer by the applicant.
Can tax risks in transactions be insured?
In mergers, acquisitions, the sale of companies or during restructuring processes, tax issues are one of the key sources of risk. Improperly identified or underestimated tax liabilities that may arise as a result of the realisation of tax risks are capable of leading to disputes, delays or even jeopardising the entire transaction. Therefore, precise analysis and effective tax risk management are an indispensable part of a safe transaction process.
What are the most common areas of insurable tax risks?
The most common areas of insured tax risks are those most frequently brought to the attention of the tax authorities during tax audits. Specifically, the risks relate to.
- Related party transactions
- Transactions within intangible services
- Transactions with foreign entities (e.g. WHT)
What does criminal liability insurance provide?
Criminal and fiscal liability insurance is a form of protection for individuals who may be liable for tax law violations, such as board members, chief accountants or tax advisors. The policy covers legal defence costs, administrative fines and other expenses related to criminal and fiscal proceedings. The purpose of the insurance is to safeguard the insured's private assets in the event of errors or omissions in tax settlements. This is particularly important in light of increasingly stringent audits and sanctions by the tax authorities.
What is tax dispute assistance insurance?
Tax Dispute Assistance Insurance is a policy that provides legal and financial support in the event of an audit or dispute with the tax authorities. It covers, among other things, the costs of an attorney, the preparation of appeals and representation before the tax authorities. It is useful for both companies and individuals, such as property owners or entrepreneurs. It protects against high costs and facilitates contact with the authorities. Litigation support under this type of insurance is provided by dedicated tax consultancy firms and the policy specifies a maximum number of disputes during the insurance period.
What is tax assistance?
Tax assistance is a consultancy service that provides rapid support in tax matters, e.g. telephone advice or assistance with document preparation. It consists of express advice related to current doubts about the interpretation of regulations, checking activities carried out by the tax authorities unannounced. It can be a stand-alone service (tax hotline) or can sometimes be an add-on to insurance policies.
Feel free to contact us:
Bartosz Doroszuk
Partner | Tax adviser E: bartosz.doroszuk@mddp.pl T: (+48) 790 732 266
Dariusz Fistek
Manager | Tax adviser E: dariusz.fistek@mddp.pl T: (+48) 696 273 865