On January 31, 2019, Poland’s Ministry of Finance (MOF) published extensive guidance (i.e., 102 pages) on the country’s new mandatory tax reporting requirements that apply from January 1, 2019. Poland enacted the rules via the Law of October 23, 2018 on November 23, 2018. Article 3(22) of the legislation added a new Chapter 11a to Poland’s Corporate Income Tax Act (Ustawa o Podatku Dochodowym od Osób Prawnych) to introduce mandatory disclosure obligations, including the implementation of EU Directive 2018/822 of May 25, 2018 on administrative cooperation in the field of taxation (“DAC 6”).
The MOF guidance covers penalties for failure to comply with the DAC 6 reporting requirements, provides examples of the various DAC 6 transaction hallmarks such to the requirements, and using MOF forms for reporting covered information, among other topics.
Tax promoters/intermediaries (defined below) should use Form MDR-1 to report information about covered transactions, and taxpayers should use Form MDR-3, both of which are available on the MOF’s DAC 6 portal. The MOF has also published a user’s manual (version 1.0) on submitting the foregoing forms to the Polish tax authority (Krajowej Administracji Skarbowej).
DAC 6 Background
DAC 6 introduces EU reporting obligations for intermediaries, such as tax advisors, accountants, banks, and lawyers, who design and promote tax planning schemes for clients. DAC 6 requires EU member states to automatically exchange information on reportable “cross-border arrangements.” EU member states must adopt and publish, by December 31, 2019, the laws, regulations and administrative provisions necessary to comply with DAC 6, and must apply these provisions from July 1, 2020.
A “cross-border arrangement” involves either multiple EU member states or a member state and a third country, where at least one of the following conditions is satisfied with respect to the arrangement:
- Not all participants are tax resident in the same jurisdiction.
- One or participants is simultaneously tax resident in more than one jurisdiction.
- One or more participants carries on a business in another jurisdiction through a permanent establishment (PE) situated in that jurisdiction and the arrangement forms at least part of the PE’s business.
- One or more participants carries on an activity in another jurisdiction without being a tax resident or creating a PE in that jurisdiction.
- It has a potential impact on the automatic exchange of information or the identification of beneficial ownership.
A “reportable cross-border arrangement” is any cross-border arrangement that contains at least one of the “hallmarks” listed in Annex IV of DAC 6. A hallmark is a characteristic or feature of a cross-border arrangement that indicates a potential risk of tax avoidance.
An “intermediary” is any person that facilitates the implementation of a reportable cross-border arrangement. It can also refer to a person, who knows or could be reasonably expected to know that he has undertaken to provide aid, assistance, or advice on facilitating or managing the implementation of a reportable cross-border arrangement.
To qualify as an intermediary, a person must meet at least one of the following additional conditions:
- Tax resident in an EU member state.
- Have a PE in a member state, through which the services for the arrangement are provided.
- Incorporated in, or governed by the laws of, a member state.
- Registered with a professional association related to legal, tax, or consulting services in a member state.
Poland will automatically exchange information received on tax planning schemes through a centralized database with other EU member states, and will impose penalties for companies that do not comply with the transparency measures. The rules will cover all intermediaries, all potentially harmful schemes, all types of direct taxes (income, corporate, capital gains, inheritance, etc.), and all EU member states.
New arrangements entered into between June 25, 2018 and January 1, 2019 must be reported to the Polish tax authorities by March 30, 2019. This is 17 months earlier than the August 31, 2020 deadline in DAC 6.
New arrangements entered into starting after January 1, 2019 must be reported to the Polish tax authorities within 30 days of one of the following events, whichever occurs first:
- The date the arrangements are made available.
- The date the first step in the implementation is taken.
Whereas DAC 6 requires reporting of cross-border arrangements only, the Polish measures also include reporting of domestic tax arrangements.
Editor’s Note: Germany and Sweden have taken a broader approach as well, in implementing the DAC 6. However, both jurisdictions have not yet enacted their DAC 6 proposals.
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