Poland’s new cooperative compliance program for large taxpayers – By Dr. Monika Laskowska, Center of Tax Analyses and Studies, Warsaw School of Economics
On 6 November, Poland’s President signed a law implementing a new cooperative compliance program in Poland for large corporate taxpayers (also referred to as horizontal auditing).
This is a new tax institution in Poland that introduces collaboration between taxpayers and the tax authorities.
The program is available to taxpayers with tax turnover of over 50 million euros, which amounts to about 2,700 taxpayers in 2019, according to Ministry of Finance data.
However, the program is facultative and, in the initial pilot phase, only 20 taxpayers will be allowed to participate.
The form of this cooperation will be outlined in an agreement between the taxpayer and the Head of the National Fiscal AuthorityTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is....
Incentives to enter the program
New Polish law offers several incentives to enter into program, namely, the program provides an informal way for taxpayers to cooperate with the Head of the NFA; partial exemption from local tax authorities competence; preliminary tax returnA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... calculation in the form of an agreement with a forecast of tax liabilities; permanent tax auditing, which allows for relief from interest in case of a tax returnA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... adjustment after audit; and a delay in the commencement of fiscal offence procedures.
The new program also accelerates procedures for advance pricing agreementsAdvance Pricing Agreements (APAs) are formal arrangements between a taxpayer, usually a multinational enterprise (MNE), and one or more tax authorities. These agreements pre-emptively establish the transfer pricing methods for a set of cross-border transactions over a specified period. APAs aim to provide certainty in tax outcomes by mitigating the risk of disputes and double taxation, which are common challenges... and provides a 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} reduction of the application fee, reduces fees for binding tax rulingsA tax ruling is a formal decision provided by a tax authority, clarifying how specific tax laws and regulations apply to an individual taxpayer or a corporate entity in particular circumstances. Often sought before a significant financial transaction or investment, tax rulings offer legal certainty by outlining the tax implications and obligations in advance. Such rulings are pivotal for multinational... and opinions on the general anti-avoidance rule, and provides for relief from mandatory disclosure regime reporting for domestic transactions.
A preliminary audit is required to enter the program. The scope of the audit, as well as the agenda, must be agreed to by the head of the NFA. The audit will proceed using delegated tax office employees.
Procedures will depend on developed practice
The new law assumes that details of the procedures will be developed as the Polish tax administrationTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... gains experience during the pilot phase.
Three such details appear to be crucial to the success of the project. First, permission to enter into the program will depend on the result of the preliminary tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as.... The effectiveness of conducting such an audit will have an important role in creating interest among taxpayers.
The preliminary tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as... will cover two full tax years plus the period before issuing the application for participation in the program. The audit will focus on the tax functions of the taxpayer rather than adjustments to the tax returnA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations.... This means that it should include tax complianceTax Compliance refers to the adherence of individuals and businesses to the tax laws and regulations of a specific jurisdiction. It encompasses the timely and accurate filing of tax returns, the payment of tax liabilities, and ensuring that all tax-related obligations are met as stipulated by legislation. Compliance involves more than just submitting tax forms; it includes maintaining accurate financial... procedures as well as the effectiveness of internal fiscal control in the organisation (i.e. proper description of the procedures and processes for tax complianceTax Compliance refers to the adherence of individuals and businesses to the tax laws and regulations of a specific jurisdiction. It encompasses the timely and accurate filing of tax returns, the payment of tax liabilities, and ensuring that all tax-related obligations are met as stipulated by legislation. Compliance involves more than just submitting tax forms; it includes maintaining accurate financial...).
As mentioned, delegated tax office employees will conduct the audits. However, the provisions do not provide full a Chinese wall, as the delegated employees won’t be able to participate in an ordinary tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as... for only three years. The time to assess tax liabilities in Poland is five years from the end of a year in which a tax returnA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations... is submitted.
Second, the program guarantees limited access to confidential taxpayer information during the course of the procedure. However, the taxpayer is obliged to prove that the information provided is of entrepreneur secrecy nature.
Third, the agreement with the Head of NFA is signed for an indefinite period of time, however without legal succession. Termination of the agreement can be done by denunciation of the agreement by either the taxpayer or the Head of NFA.
A notice of termination enters into force with an immediate effect. There is no possibility to appeal against a notice of termination. Such immediate termination can involve ex-post risk of a tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as... with retrospective effect if the Head of NFA identifies new circumstances.
Despite these potential drawbacks, interest in the program is high and a large number of taxpayers have expressed their willingness to participate.
