The Act of 2 March 2020 on Special Solutions related to the Prevention, Counteracting and Combating of COVID-19, other Infectious Diseases, and the Crisis Situations caused by them (the so-called Shield 1.0), suspended the deadlines relating to the reporting of tax arrangements which was motivated by the desire to reduce the formal burdens imposed on entrepreneurs and tax authorities during the coronavirus pandemic. The regulation in force, stipulated that the deadlines for reporting tax arrangements should not start, but if they had already started are now suspended from 31 March 2020 until the date the epidemic threat status and the epidemic status announced in connection with COVID-19 is cancelled, but no longer than until 30 June 2020
The Act of 19 June 2020 on Subsidies for Bank Loans granted to provide Financial Liquidity to Entrepreneurs affected by COVID-19 (the so-called Shield 4.0) introduces a significant modification in relation to the suspension of reporting dates for tax arrangements. In accordance to the amended provision, in the case of a tax arrangement, within the meaning of the provisions of the Tax Ordinance, the deadlines indicated in the MDR regulations do not start and those that have already started are suspended from 31 March 2020 until the 30th day following the date the state of epidemic threat and the state of epidemic announced in connection with COVID-19 is cancelled; however, in the case of cross-border tax arrangements, within the meaning of Art. 86 § 1 item 12 of the Tax Ordinance, this suspension lasts no longer than until 30 June 2020.
The above regulation is beneficial for entities obliged to report their tax arrangements because it once again postpones the deadlines for performing certain actions in the field of reporting. It is also beneficial that the deferral of the deadlines will continue until the 30th day following the cancellation of the epidemic threat and epidemic status which means that after cancelling the above states, entrepreneurs will have an additional period of time in order to fulfil their obligations concerning reporting their tax arrangements. Under the present regulations, there was the possibility that the deadline for undertaking specific actions in the field of the MDR would expire immediately after the cancellation of the state of the threat and epidemic which would then result in the risk of failure in meeting the required obligations within the statutory time which, in turn, would result in the possibility of having severe financial penalties imposed.
It should be noted, however, that the amendment introduced also stipulates that the postponement of the reporting obligations for cross-border tax arrangements will definitively end on 30 June 2020 regardless of the ongoing epidemic status. Therefore, as of 1 July 2020, in relation to cross-border tax arrangements, the deadlines for undertaking specific actions related to their reporting to the Head of the KAS will begin, or the deadlines that began before 31 March 2020 will continue to run.
The above regulation is closely related to another recently passed Act which does not apply to solutions related to COVID-19, but instead contains tax changes aimed mainly at adapting the Polish provisions to EU directives. This is the Act of 28 May 2020 which amends the Act on the Tax on Goods and Services, and the Act on the Exchange of Tax Information with other Countries, as well as certain other acts. This new Act, in addition to comprehensive changes in the VAT regulations concerning the movement of goods in call-off stock warehouse procedures, and the introduction of a completely new chapter dealing with hybrid structures in the CIT Act, also contains important regulations concerning the reporting of cross-border tax arrangements. This change is related to the implementation of the EU directive in the field of the mandatory automatic exchange of information in the field of taxation in relation to notable cross-border arrangements into the Polish regulations.
In view of the above, from 1 July 2020, the new Act introduces into the Act on the Exchange of Tax Information with other Countries, a completely new chapter concerning the automatic exchange of information concerning cross-border tax arrangements. The introduced provisions impose the obligation on the Head of the KAS to provide the relevant authorities of the Member States, through automatic exchange, information concerning cross-border tax arrangements. The information provided must include the tax arrangement number (NSP), and the number of the cross-border tax arrangement report (NZSPT - a new definition introduced into the provisions of the MDR in the Tax Ordinance), as well as the data specified in the Act, including, among other things, the identity of the advisor, intermediary, and taxpayer; information about the generic or specific hallmarks; a summary of the description of the tax arrangement; and an indication of the day of the first activity related to the implementation of the arrangement, etc.
The Head of the KAS is required to provide the required information to the authorities of the other Member States within one month from the end of the quarter in which the Head of the KAS received this information. The information should be provided using the standard form applicable in all EU countries. Once a year, the Head of the KAS will also provide the European Commission with an annual assessment of the effectiveness of the automatic exchange of information concerning cross-border tax arrangements, as well as its practical results.
Due to the fact that the presently used form needed to report cross-border tax arrangements does not allow the Head of the KAS to generate the data necessary for the automatic exchange of information with other countries, the provisions of the above Act impose on advisors, taxpayers, and intermediaries the obligation to report cross-border tax arrangements, even those that have already been reported.
The regulations impose the obligation to provide the Head of the KAS with information concerning cross-border tax arrangements if the first activity related to their implementation (within the meaning of Article 86a §1 item 17 of the Tax Ordinance) was made during the period from 26 June 2018 and 30 June 2020. The dates to report these arrangements are as follows:
a) advisors (promoters) will be required to report arrangements before 31 July 2020.
b) taxpayers will be required to report arrangements before 16 August 2020.
c) intermediaries (supporters) will be obliged to report arrangements before 31 August 2020; at the same time, intermediaries will be required to inform, in writing, either the taxpayers or advisors who requested the intermediaries’ assistance, that in their opinion the undertaken transaction constitutes a tax arrangement subject to being reported to the Head of the KAS.
The assessment as to which of the above indicated entities has the obligation to report the cross-border tax arrangement under the given circumstances should be made on the basis of the MDR provisions contained in the Tax Ordinance. For example, as a rule, a taxpayer will be required to report the arrangement if the advisor has not informed them about the submission of the arrangement, or has informed the taxpayer about the obligation to submit the arrangement by the taxpayer themselves (due to the advisor being bound by the obligation to observe professional secrecy as protected under the law).
In accordance to the introduced regulation, in the event that more than one entity is required to provide information concerning a cross-border tax arrangement and the information about this arrangement has already been transferred to the Head of the KAS before 30 June 2020, the obligation to re-report this arrangement to the Head of the KAS should be performed by the entity that previously provided this information to the Head of the KAS.
Should the cross-border tax arrangement be a standardised tax arrangement, within the meaning of the MDR, the advisor or the intermediator, or the intermediator who provided the Head of the KAS with information about this arrangement on the basis of the above-described regulations, are additionally obliged to provide the Head of the KAS, before 31 August 2020, with the identification data of the taxpayer to which this tax arrangement was made available during the period from 26 June 2018 and 30 June 2020, by indicating the NSP of the tax arrangement.
The above information must be provided to the Head of the KAS with the use of the logical structure (schema) which will come into force on 1 July 2020.
All reported cross-border tax arrangements will be given an NSP. The new numbers will also be assigned to those arrangements that have already been notified and to which an NSP was earlier issued. Therefore, according to the new regulations, an NSP which was issued before 1 July 2020 concerning cross-border tax arrangements will become invalid on 1 July 2020.
In addition to the above, the new law also introduces certain additional changes to the MDR regulations contained in the Tax Ordinance. In this respect, the following should be mentioned:
a) the introduction of a new concept and definition of "NZSPT" which will mean the number of the cross-border tax arrangement notification as assigned by the Head of the KAS for the automatic exchange of information concerning cross-border tax arrangements;
b) a change in the wording of the part of the specific hallmark which deals with payments to those related entities located in tax havens (new wording of Art. 86a § 1 item 13 (a), second indent: "the payee has their place of residence, registered office, or management, in a territory or country applying harmful tax competition, as indicated in those executive acts issued on the basis of personal income tax regulations and corporate income tax regulations, and on the EU list of non-cooperative jurisdictions for tax purposes adopted by the Council of the European Union”);
c) regulating the scope of powers of attorneys related to the MDR by adding a provision according to which a special power of attorney to act on a matter in the scope of the MDR provisions also authorises attorneys to act in other matters of the same scope, unless the power of attorney states otherwise (under the existing regulations, there were doubts whether a separate power of attorney was required for each individual MDR reporting); at the same time, the transitional provisions indicate that special powers of attorney in the field of MDRs which were submitted but not cancelled by 30 June 2020 now become special powers of attorney within the meaning of the above-mentioned new provision
d) a change in the rules for the representation of taxpayers who are not natural persons when signing MDR-3 information (this needs to be submitted when the taxpayer has performed activities that are part of the tax arrangement or has obtained a tax benefit from it); the new regulation stipulates that the information provided by foreign entrepreneurs operating in Poland through a branch will be signed by the person representing the entrepreneur in the branch, whereas, in the case of other taxpayers, by the person authorised to represent the taxpayer; this is an important change from a practical point of view because the regulations to date required that all members of the board had to sign the report and additionally, the proof of all the signatures had to be filed by one of the members of the board to the Head of the KAS; however, it will still not be possible to sign an MDR-3 by proxy;
e) the possibility for the Head of the KAS to request from the person providing information on the basis of the MDR provisions to supplement this information or clarify any doubts as to its contents both before or after the NSP has been granted, in particular for the automatic exchange of information concerning cross-border tax arrangements; completing the information on the tax arrangement will require providing a full range of data related to the arrangement;
f) the possibility for the Minister of Finance to authorise another KAS body to perform the tasks of the Head of the KAS in relation to reporting tax arrangements.
The above amendments to the MDR provisions will enter into force on 1 July 2020.