Draft of New Polish Tax Code Reveals Further Wins for Taxpayers

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By Jan Stojaspal

The completed draft of Poland’s new tax code contains further improvements to taxpayer standing in Poland, according to two Polish tax practitioners who were shown a copy of the yet-to-be publicly disclosed document by Gazeta Prawna, a local legal and economic affairs newspaper.

The introduction of three forms of alternative conflict resolution, as well as a basic bill of taxpayer rights, an obligation for the tax authorities to provide more thorough explanations when justifying administrative decisions, and extensions to key appeal deadlines, have already been disclosed during the drafting process of the document.

The completed draft also includes:

  •  the possibility for companies to request a tax audit—for a fee;
  •  the possibility to appeal a first-level decision of the tax authorities directly to a court;
  •  the introduction of a form of horizontal tax monitoring that would allow Poland’s largest taxpayers to work together with the tax authorities on an ongoing basis, as opposed to only being subjected to ad-hoc, retrospective checks;
  •  provisions for decreasing the number of individual tax interpretations, which only concern individual cases and are, at times, contradictory, in favor of general tax interpretations; and
  •  the stipulation that the tax authorities must rule in favor of the taxpayer in cases when conclusive evidence of wrongdoing is unavailable.

Replacing 1998 Law

The new tax code is intended to replace legislation, which has been in force since 1998 and since that time has been amended more than 100 times. It is expected to be implemented in 2019, at the earliest, the tax practitioners said.

Even though it is a complex legal document with almost twice as many articles as the current version, taxpayers can expect “greater flexibility on the side of tax authorities and much more tax certainty,” Filip Switala, director of the tax system department at the Polish Ministry of Finance and a member of the Codification Commission, which drafted the new tax code, told Bloomberg BNA Sept. 15.

The commission delivered the completed draft Oct. 9, Switala told Bloomberg BNA in an Oct. 10 email.

“At present, the draft of the new tax code is being prepared for public consultations, he added. “Concurrently, the services of the National Tax Administration and of the Ministry of Finance will analyze the draft.”

The precise start of public consultations is yet to be determined, since “the Codification Commission is of the opinion that we should first look at the draft internally and then publish it for consultation,” he said.

“Within the coming weeks, the ministry intends to extend the bases and assumptions of the draft of the new tax code, adding more solutions aimed at improving the taxpayer-revenue relations and will submit the relevant proposals to the Codification Commission,” he added.

Taxpayer Position Strengthened

Przemyslaw Dominik Antas, managing partner of Warsaw-based ANTAS Tax & Legal, liked what he saw when he read the completed draft.

“My first impression is that it strengthens the position of the taxpayer,” he told Bloomberg BNA Oct. 11.

Its enforcement, however, may be a challenge as the draft lacks incentives for tax officials to embrace alternative dispute resolution, for example, he added.

“My general concern is whether it will fit into the things that tax officials are used to,” he said. “My concern is that an ordinary tax official will not risk an amicable settlement, for instance. He may be more likely to go in the very, very standard way and issue a decision, which will be subject to an appeal or court, but nobody will accuse him that he made a decision which was bad for the budget.”

“If I designed this regulation, I would try to introduce a mechanism that would give comfort to tax officials to opt for an amicable settlement, for instance,” he said.

Path of Compromise

As to whether the draft is likely to substantially change during the ensuing legislative process, Antas predicted a path of compromise.

Even though the project started under the previous government, the Codification Commission is largely an apolitical body, mostly made up of academics, he explained. Also, the project responds to real issues that have long been a challenge for the local business community, he added.

“There will be some provisions that will definitely not be welcomed by the current tax authorities, which are pretty aggressive nowadays in Poland,” he said, citing as an example the stipulation that the tax authorities must rule in favor of the taxpayer in cases when conclusive evidence of wrongdoing is unavailable.

According to Antas, “the most possible scenario” is that the authorities “will embrace this new project but then start changing this and that.”

Complete Overhaul?

Jacek Drosik, a tax adviser with Katowice-based Slazak, Zapior and Associates, wasn’t convinced that the tax code needed a complete overhaul, particularly if the result was a document containing nearly twice as many articles.

“I don’t know if this is a good way,” Drosik, who also read the completed draft, told Bloomberg BNA Oct. 10. “In my opinion, we need to work on some concrete taxes, especially VAT, personal income taxes. General tax law, in my opinion could wait.”

On balance, he said that the proposed expiration of all tax liabilities after 25 years, which is part of the completed draft, is a “very good change.”

The statute of limitations is officially five years, “but it can be suspended, extended, broken, and the result is that tax liabilities never expire,” he said. “25 years seems like a sentence to life, but it’s better than nothing.”

To contact the reporter on this story: Jan Stojaspal in Prague at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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