Works have been pending on an amendment, in 2018, to the provisions of the Tax Ordinance concerning issuance of individual tax rulings.
The projected amendment:
- introduces changes in applications which concern tax consequences of transactions made by, and other events that occur with the participation of, domestic and foreign affiliates (within the meaning of the PIT and CIT regulations),
- may substantially (adversely) affect tax rulings which have already been issued to taxpayers as regards transactions and other events with the participation of affiliates.
Below please find the fundamental provisions of the Amendment.
1. Group Applications
Whenever related entities (within the meaning of the PIT and CIT regulations) participate in a transaction or another event being the subject of an application for an individual tax ruling, such an application should be filed jointly by the participating related entities (“Group Application”).
The application should consist of additional (not required so far) pieces of information, in particular:
- anticipated or derived benefits, including tax ones, which arise (directly or indirectly) out of the transaction made or other activities performed,
- transactions and other activities performed, pending or planned, upon which gaining of the main benefits referred to above is made conditional,
- the value of enterprise, its organized part or property right as described in facts or a future event (the value to be over 10 million zlotys),
- the value of main benefits,
- the period for which the aforementioned values have been determined,
- a description of ties among affiliates to which the group application pertains.
The deadline for an individual tax ruling will be 6 months.
Same as previously, the Director of the National Revenue Information may refuse to issue an individual tax ruling whenever in his/her opinion it can be reasonably assumed that the provisions of the General Anti-Abuse Rule may apply to elements of facts or a future event (Art. 119a of the Tax Ordinance).
2. An impact of the amendment on pending proceedings for issuance of an individual tax ruling
The amended regulations will apply also to applications for an individual tax ruling concerning transactions or other events with the participation of related entities, which applications have already been filed but not examined by the effective date of the new regulations. In such cases, the Director of the National Revenue Information may call upon taxpayers to complete their applications by adding the information required for the Group Applications (vide Sec. 1).
3. An impact of the amendment on tax rulings issued before the effective date of the amendment
As regards the tax rulings issued before the effective date of the amended regulations, such tax rulings to involve transactions or other events that meet prerequisites of being covered by Group Applications, the Amendment provides for the expiry of such tax rulings as from the effective date of the amended provisions if the taxpayer to whom such a tax ruling was issued fails to provide the Director of the National Revenue Information, within 6 months following the effective date of the amendment, with the information required in the Group Application, without being summoned to do so (vide Sec. 1).
After having been provided with the foregoing information, the Director of the National Revenue Information may:
- change the issued tax ruling as far as the description of facts or future event is concerned or as regards the assessment of the applicant’s position (e.g. deem it incorrect),
- overrule the tax ruling and discontinue the proceedings in the matter if in view of the new information the Director is going to state that it can be reasonably assumed that the provisions of the General Anti-Abuse Rule may apply to elements of facts or a future event.
4. A need to verify individual tax rulings already in one’s possession
In view of the risk of expiry of the tax rulings obtained to date, as referred to in Sec. 3 above, it will be of material importance to review contents of existing tax rulings in terms of them meeting the conditions that make it necessary for the taxpayer to provide the Director of the National Revenue Information with the additional information in question.
We will be happy to assist you in this regard.
Should you have any questions or require further details of the draft amendment, please do not hesitate to contact me.