Tax authorities apply General Anti-Avoidance Rules

Recent information published by the Ministry of Finance shows how the tax authorities are making use of the General Anti-Avoidance Regulations (GAAR) and provide details of opinions recently issued by the Council for Prevention of Tax Avoidance, which is in Polish Rada do spraw przeciwdziałania unikaniu opodatkowania (“Council”). We note that the Council has been used infrequently to date and has assessed only a handful of complex cases since it was first established in July 2016.

On 15 July 2016 General Anti-Avoidance Regulations (GAAR) were implemented to the tax system and at the same time, a Council for Prevention of Tax Avoidance was set up. The aim of the Council is to assist the Ministry of Finance in analyzing whether particular steps planned or implemented by a taxpayer should be subject to GAAR restrictions. The Ministry of Finance may ask the Council for its opinion after receiving an application from a taxpayer requesting a so-called “securing opinion”. This is an opinion used by the Ministry of Finance to confirm whether or not GAAR regulations may be applied in a given case.

On 18 December 2019, the Council issued three separate resolutions with respect to steps taken by a taxpayer in the restructuring of its shareholdings. These steps included a series of actions comprising the following: the establishment of an SPV, the in-kind contribution of the shares of a target company to the SPV, the sale of shares in the target company by the SPV and the transformation of the SPV into a partnership followed by its winding-up. The taxpayer implemented all of these steps in a tax neutral manner. Some of them were implemented on dates prior to the introduction of GAAR rules in mid-2016.

The Council came to the conclusion that the above series of steps constitute a tax scheme aimed at the avoidance of tax and that the Ministry of Finance may apply the GAAR restrictions in this case.

It is relevant that in this case some of the steps were taken prior to July 2016, which is prior to the date when GAAR rules took effect. The Council questioned whether GAAR rules can apply in such cases. However, it made clear that GAAR can be applied in cases where both: (i) the tax benefit and (ii) steps resulting from the tax scheme were taken after GAAR rules were implemented. However, it is doubtful whether GAAR can be applied successfully if some of the steps of the restructuring were implemented before July 2016. The Council concluded that it is not competent to assess whether the GAAR transitional rules conform with the Polish Constitution.

If you have questions, please contact one of ASB Tax specialists:

Łukasz Bączyk
Tax Director

Marta Skrodzka
Tax Manager

Paweł Jóźwik

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