Ministry of Finance Rolls Out New Plans for Fighting Tax Optimization

Entrepreneurs in Poland shake their heads in disbelief after the Ministry of Finance revealed new provisions that are to be found in the upcoming Tax Ordinance act the Ministry experts are currently working on. The lawmakers decided to focus on taxpayers who reach for individual tax interpretation which safeguards them against unfavorable decisions of fiscal authorities (which in certain cases may have devastating consequences). Ministry officials want to curb the use of such interpretations, viewing them as a tool for unfair tax optimization.

The changes the officials want to introduce concern related entities, i.e. those that have the same owners or are linked through equity. Related parties should not refer to individual interpretations but apply for group interpretation instead, say the Ministry. Shockingly, there is talk of the existing interpretations becoming invalid once the new legal provisions are introduced.

Critics point out this would break the elementary rule that law cannot be retroactive and would strip numerous Polish companies of protection against tax officials. The idea turned out to be so controversial that it raised concern in the Ministry of Entrepreneurship and Technology, Government Legislation Centre, and Prime Minister’s Office, not to mention numerous business-related NGOs.

The Ministry of Finance wants Polish enterprises to submit additional information for the purpose of verifying the already issued tax interpretations. PGE, one of the biggest companies in Poland, criticized the solution, calling it an additional, significant and time-consuming obligation. PGNiG, another state-owned giant, new regulations will crunch the stability of the legal environment in the country and introduce excessive administrative burden.

Proponents of the changes in the Tax Ordinance Act say the purpose of the new provisions is to limit excessive use of tax interpretations for aggressive tax optimization and additional tax advantage, which causes the state budget to lose money. Honest companies do not need to worry, they claim.