At the beginning of 2021, tax capital groups and CIT taxpayers with income that excess EUR 50 million will be obliged to prepare and publish information on the tax strategy implemented for a given tax year.
It is worth taking a closer look at this regulation.
The provisions of the act do not define what such information is. It is indicated that this information is to be prepared taking into account the nature, type and size of the business and include, in particular:
- information on the processes and procedures used by the taxpayer for managing the performance of obligations under the tax law and ensuring their proper performance, as well as voluntary forms of cooperation with the authorities of the National Revenue Administration;
- information on the fulfillment of tax obligations by the taxpayer in the territory of Poland, along with information on the number of information submitted on tax schemes;
- information on: transactions with related entities, the value of which exceeds 5% of the balance sheet total of assets, and restructuring activities planned or undertaken by the taxpayer that may affect the amount of tax liabilities of the taxpayer or related entities;
- information on applications submitted by the taxpayer for: tax interpretations, binding rate and excise information;
- information on tax settlements of the taxpayer in territories or countries applying harmful tax competition.
The publication obligation does not apply to information covered by a trade, industrial, professional or production process secret.
The information must be published on the taxpayer’s website by the end of the next year (e.g. by 31/12/2022 for 2021). The publication and the address of the head of the tax office are announced within the same period. A sanction for non-compliance is a penalty of up to PLN 250,000, which is imposed on the taxpayer.
How to count the threshold of 50 million euro?
For this purpose, income should be converted according to the average euro exchange rate announced by the National Bank of Poland on the last working day of the calendar year preceding the year in which the data was made public.
When should the first information be published?
It would seem that since the obligation enters into force from the beginning of 2021, the first year of publication of information will be 2021 (with the deadline of 31/12/2022). Meanwhile, the Ministry of Finance informs that due to the fact that the amending act does not provide for specific transitional regulations, taxpayers will be required to prepare and publish information already for 2020, by 31 December 2021.
Do the regulations introduce an obligation to have written (codified) tax procedures?
The provision of information itself – in theory – does not introduce an obligation to have written (codified) tax procedures. Such obligations may include specific provisions (e.g. in the area of MDR). Nevertheless, since it is necessary to describe the “processes or procedures” applied, in particular in the context of a tax strategy, this means that such a strategy must exist. Therefore, it is difficult to imagine that it would not be codified in any way.
Regardless of the duties, it is worth having such procedures – they help: avoid errors in settlements, manage tax risk, prove due diligence or defend against criminal and penal fiscal charges.
Can anyone be exempt from publishing information?
Yes, this obligation will not apply if the taxpayer is a party to a cooperation agreement concluded with the head of the National Revenue Administration.
What are restructuring activities?
These will certainly include events such as: merger of companies, transformation of the company into another company, contribution to the company in the form of the company’s enterprise or its organized part (including the division of the company) or exchange of shares. In my opinion, this concept may also cover situations of transfer of economically significant functions, risks and assets between related entities.
How to approach the issue of trade secrets?
The exemption from the publication obligation applies to information that may be related to a trade secret. Its basic feature is confidentiality, so it should be assessed each time whether the issue that will not be published by the protected entity is considered classified.
How should the information and the tax strategy?
The information contains a specific report on how the entity implemented its tax strategy, in particular by indicating the elements required by the regulations. The legislator leaves a certain freedom of form here, ordering only to take into account the elements indicated in the provision.
The strategy itself should certainly include process management elements, such as: management of the tax function and tax risk, control and supervision, or other decision-making processes. Importantly, it is worth that the strategy includes a definition of the individual’s approach to the obligations related to paying taxes.