In order to mitigate the arbitrariness of the General Anti-Abusive Regulations (GAAR), the Polish legislator decided to establish the Anti-Tax Avoidance Council (hereinafter: the Council) issuing opinions on the applicability of the GAAR clause and measures limiting contractual benefits in individual cases.
The Council issues opinions at the request of the Head of National Revenue Administration (KAS) in the course of conducted clause proceedings. However, the Council’s opinions are not binding for the abovementioned tax authority. Nevertheless, in its decision, the Head of KAS is obliged to refer to the content of the Council’s opinion, in particular when it is favourable to the taxpayer and it follows from the decision that the GAAR clause is applicable.
What was the position of the Council in its first opinions?
Opinions of the Council of 18 December 2019 presented in Resolutions No. 3/2019, 4/2019 and 5/2019
Shareholders (family members) of the company over the period 2015-2016 carried out a number of activities aimed at selling the company’s shares held by them to an external investor through designated special purpose vehicles (SPV).
In the opinion of the Council, the related activities (including share for share exchange resulting in the step of the cost base to be recognized at the subsequent sale of shares and transformation of a special purpose vehicle into a partnership and its subsequent liquidation) meet the statutory tax avoidance criteria and allow for the application of the GAAR clause. By using special purpose vehicles, income generated from the sale of shares was not subject to PIT, which would be the case if the shares were sold directly by the Shareholders.
The Council has doubts, however, on the applicability of tax avoidance provisions in the intertemporal aspect in the light of constitutional standards. The events described in the application occurred at a time when the GAAR clause was not yet in force. In the Council’s opinion, applying the amended provisions to the taxpayer’s actions made entirely before they entered into force could result in a breach of the retroaction ban.
Opinions of the Council of 2 March 2020 presented in Resolutions No. 1/2020 and 2/2020
Over the period 2013-2016, the Partners of a company carried out a set of activities aimed at selling their shares to an external investor through a special purpose vehicle. As part of the activities undertaken, the Partners established a company, transformed it into a tax transparent partnership which was subsequently dissolved by dividing its assets, without formal winding-up procedure.
The liquidation assets received by the Partners were excluded from the Partners’ revenues within the meaning of the PIT Act. In the Council’s opinion, taking into account the circumstances of the actions taken, premises for the application of the GAAR clause have occurred. The Partners’ goal of terminating business activity could be achieved by liquidating the company before the transformation.
The Council also expressed concerns as to the exhaustion of all available legal means by the Head of KAS in order to properly determine the tax consequences of transactions being the subject of issued opinions.
Opinions of the Council of 8 October 2020 presented in Resolutions No. 5/2020 and 6/2020
The set of activities consisted of tax-favourable disposal of shares through capital and personally related entities, including closed-end fund. Actions taken included, among others sale of shares in a joint-stock company and acquisition of investment certificates – revenues obtained were reduced by the deductible costs which were subject to tax step-up as a result of tax-neutral share for share exchange transactions, the transformation of a company into a partnership and its dissolution without liquidation.
In the Council’s opinion, by performing actions which were artificial, there was created a tax advantage contrary to the object and purpose of PIT Act provision, according to which income obtained from the sale of shares is subject to taxation. An economic result of the performed actions could be achieved through direct sale of shares, without the participation of related entities.
The Council noted that there are no grounds for questioning the proposed settlement of the overpayment of the tax collected by the payer with the tax due resulting from the application of the GAAR clause. Not taking into account the amounts paid by the entity against which the decision is issued under anti-avoidance regulations would lead to double taxation of the same entity on the same income.
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