The MDDP’s Practice supports entrepreneurs in minimizing the risk of having the correctness of tax settlements questioned by tax authorities in connection with the new regulations and in preparing companies for potential tax audits or tax litigation. We make use of business analysis based on both national and international regulations (including EU regulations) and the extensive experience of our experts arising from their participation in tax audits and tax litigation.
In recent years, a number of changes have been introduced to Polish and international tax law aimed at increasing the integrity of tax systems, ensuring transparency and reducing the benefits obtained by companies involved in tax planning or combating tax avoidance:
- General anti-abuse rules which entitle tax authorities to challenge tax benefits resulting from artificial arrangements without commercial justifications the purpose of which is to achieve a tax benefit incompliant with the law;
- Specific anti-abuse rules, regarding restructuring activities, financing, intra-group transactions, resulting, among others, from the EU ATAD and ATAD-2 directives against tax avoidance practices;
- Mandatory Disclosure Rules, i.e. the obligation of disclosing tax schemes – providing for full transparency of operations carried out by the taxpayer towards tax authorities, including also ordinary business operations not related to tax planning (e.g. dividend payments, deferred tax reporting);
- Base erosion and profit shifting – a number of provisions limiting tax planning strategies used by international companies, consisting in “shifting” profits from jurisdiction with a higher tax rate to countries with a lower tax rate; these include e.g.: MLI Convention (already ratified by Poland) introducing a number of amendments to treaties for the avoidance of double taxation and serious changes in the transfer pricing principles;
New regulations are often based on imprecise, overgeneralized clauses, which may lead to over-interpretation and abuse of these legal measures by tax authorities, and the application of the new regulations may result in serious tax consequences (e.g. additional tax liabilities) and even criminal liability.
The risk of applying these provisions may in particular apply to entities which:
- perform economically justified but complex transactions;
- operate in global business environment;
- restructure their organization (currently or in the past);
- have participated in tax optimization plans (e.g. by increasing the value of intangible assets or fixed assets, dividing the company, or establishing a tax capital group, etc.)