With effect as of 1 January 2019 a new chapter has been added to the Tax Code introducing the additional tax liability - an institution already in operation with respect to the tax on goods and services.

According to the statement of reasons for the act, the main reason for the new regulation is the hitherto insufficient deterring effect of the anti-tax avoidance clause. This is because it merely entails forfeiting undue tax benefits increased, in certain situations, by the interest on tax arrears. This is not enough to deter taxpayers from avoiding taxation.

Under the amendment, a tax authority will (obligatorily) determine an additional tax liability in the case where it issues a decision based on:

1. Regulations on the anti-tax avoidance clause;
2. Measures restricting contractual benefits;
3. The so-called small anti-tax avoidance clauses under income tax regulations;
4. Transfer-pricing regulations;
5. Regulations concerning the fiscal liability of a tax remitter for failure to withhold tax, where a statement on the grounds of which a lower rate was applied or tax not withheld on payments in excess of PLN 2 million per year was not true, the remitter failed to carry out the obligatory verification or the verification carried out by the tax remitter was inadequate to the nature and scale of the remitter’s operations.

Under the new regulation, in cases set out in paragraphs 1-3 above, the tax authority will be in a position to abstain from imposing sanctions if under the circumstances and facts at issue it can be assumed that the he acted in good faith, i.e. at the time the activities being subject of the decision were being undertaken, the taxpayer acted on an an erroneous, but justifiable, belief that the tax benefit gained by him in such circumstances was in compliance with the contents and goals of a tax statute or its provision.

The regulations also state that acting in good faith can be specifically assumed where a taxpayer does not do business or does business on a small scale; hence, it can be reasonably expected that he would not have sought professional advice on the tax implications of the activities being subject of the decision.

Tax rates

The tax sanction will be as follows:

• 10% of the amount of an unduly disclosed or excessive tax loss and of the taxable income undisclosed in full or in part in the event of a decision issued under the regulations referred to in paragraphs 1-4, with regard to income taxes, with the exception of the lump-sum (summary) forms of taxation;
• 40% of the amount of a tax benefit – in the event of a decision issued under the anti-tax avoidance regulations with respect of taxes other than income tax (e.g. real estate tax, agricultural tax);
• 10% of the taxable base of the receivable in respect of which the tax remitter applied a lower tax rate or failed to withhold the tax at the source.

Increased rates

Notably, the legislator has also provided for a possibility of the tax rates being doubled where:

• Where the base for the determination of a tax liability exceeds PLN 15 million – with regard to the excess over that amount;
• 10 years have not lapsed since the end of the calendar year in which the taxpayer or tax remitter was served with a final decision issued under the anti-tax avoidance clause, measures restricting contractual benefits and the so-called small anti-tax avoidance clauses, with regard to the amount serving as the base for the determination of an additional tax liability;
• The party failed to submit to the tax authority relevant transfer-pricing tax documentation - as regards the part of the base for the additional tax liability which corresponded to the transaction for which such tax documentation was not submitted.

However, it should be emphasised that filing incomplete documentation and then completing it fully within the deadline set by the tax authority – not longer than 14 days – will not entail negative implications for the taxpayer.

The amendment also provides for a possibility of the rate being tripled. This will concern situations where the base for the determination of the tax liability exceeds PLN 15 million and the party has failed to submit relevant transfer-pricing documentation.

The additional tax liability rates – both basic and increased ones - can be halved if the taxpayer have submitted a corrected return. This solution is similar to those known in the Tax Code with respect to decreasing default interest. Under the amendment, the tax sanction will not apply to individuals incurring fiscal-criminal liability for a fiscal offence or fiscal misdemeanour on account of the same action.

Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.

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