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Analysis

Anti-avoidance clause: the current practices of tax authorities

Tax Alert 3/2017 | 9 May 2017

The tax law avoidance clause was introduced to the Polish tax law system on 15 June 2016. Although no decision has been issued based on the clause so far, the practices of tax authorities applying its selected provisions can be analysed after twelve months since the implementation.

Examples of applying the anti-avoidance clause

One of the most typical examples of applying the anti-avoidance clause are cases where tax authorities refuse to issue a tax ruling, because they reasonably suspect that certain elements of the facts of the case or the future event indicate tax avoidance. Tax rulings were refused in cases related to effects of donations, company revaluations and contributions-in-kind. There is no official data on the number of refusals issued because the authorities had considered the possibility of applying the anti-avoidance clause. The Polish Ombudsman requested the Minister of Finance and Development to publish such information in a letter No. V.511.25.2017.EG indicating a number of doubts arising from the implementation of the clause.

First decisions of the Regional Administrative Court

First decisions of Regional Administrative Courts were also issued - most of them related to refusals to issue a tax ruling. For instance, the Regional Administrative Court confirmed that a tax ruling may concern the protective power of a tax ruling if the clause is applied. The Regional Administrative Court in Gdańsk decided that the authority issuing a tax ruling has no authority to decide if the proceedings under the clause could be carried out in a given case.

Moreover, a securing opinion on a business combination was refused on 16 December 2016 (file No. 145058/K). Although the decision in question concerned a specific transaction between specific companies, statements and arguments included in the document may indicate how tax authorities may interpret the provisions of the clause. In the refusal in question, the Minister of Finance and Development interpreted a sequence of actions of the transaction as one sequence of actions within the meaning of the clause (i.e. as one action under the clause). Still, referring to the objective of the action, the Minister divided the sequence of actions into individual steps and referred to business objectives of individual stages, not to the entire sequence. This approach may raise certain doubts in the context of the clause. Moreover, the content of the refusal may suggest that tax authorities may focus on figures disclosed in the list of tax and non-tax benefits resulting from a given action when assessing whether a given action was carried out to derive tax benefits. Finally, arguments raised in the refusal may indicate that wherever a given action was deemed as taken solely to derive tax benefits, such action should be considered unnatural.

Alert about the possibility to apply the anti-avoidance clause

On 8 May 2017 the Ministry of Finance published on its website a “Minister’s of Finance alert about tax optimization of closed-end investment funds using bonds”. In accordance with the information published, it is the first of a series of documents warning that an anti-avoidance clause could be applied to certain structures. According to the alert, in certain circumstances, a structure with closed-end investment funds and bonds could potentially be considered as tax avoidance, to which the anti-avoidance clause shall apply.

Authors: 

Maciej Guzek | Director in Tax Advisory Department

Mariusz Stefaniak | Manager in Tax Advisory Department

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