What exactly is the GAAR clause and how should it be perceived in the context of the Polish Deal?
The GAAR clause, i.e. the anti-tax avoidance clause, is defined in Art. 119 of the Tax Ordinance. Pursuant to this provision, liquidity does not result in the achievement of a tax advantage, if the achievement of such an advantage, contrary to the object or purpose of the tax act or its provision in the given circumstances, was the main or one of the main purposes of its implementation, and the method of operation was artificial (tax avoidance).
What is the GAAR clause?
Tax authorities are constantly striving to tighten the tax system, limit incorrect practices of taxpayers aimed at avoiding taxation. One of the instruments of tax policy aimed at combating unfair taxpayers’ practices is precisely the GAAR clause.
Its main assumption is that it can be applied in a situation where the main or one of the main purposes of performing a specific activity is the achievement of a tax advantage inconsistent in a given legal state with the object or purpose of the tax act or its provision. The GAAR clause is undoubtedly a controlling and informative instrument. It serves the tax authorities in combating tax fraud.
What are these artificial activities?
The aftermath of the GAAR clause is the assessment by the tax authorities whether the actions taken by the taxpayer are artificial. The assessment of whether the actions were artificial may be indicated, inter alia, by the existence of unjustified splitting of operations or the involvement of intermediaries despite the lack of economic or economic justification.
If, in the opinion of the authority, it turns out that the activities were of an artificial nature, then this is a condition for considering it as an activity aimed at avoiding taxation.
When can the GAAR clause be avoided?
The GAAR clause will not apply and the tax authorities will not be able to rely on it, inter alia, in relation to an entity that has obtained a security opinion – to the extent covered by the opinion, until the date of delivery of the revocation or amendment of the security opinion, or to the entity that concluded the tax agreement referred to in Art. 20zb point 3, within the scope of this agreement.
Polish Deal and the GAAR clause
The revolution in tax law caused by the introduction of the provisions of the Polish Deal is undoubtedly an opportunity for taxpayers to look for optimal forms of business. This tax coup was the beginning of changes in the concept of running a business. Therefore, questions arise whether a change in the form of cooperation (e.g. from an employment contract to a B2B contract) or even the form of taxation itself will be treated as tax avoidance.
Although in the case of a change in the form of taxation, it would be difficult to consider such an activity as tax avoidance, the change of the form of cooperation does, although it always depends individually on the circumstances accompanying this change. In recent weeks, the outflow of employees observed on the IT market, who prefer to tax their income with a lump sum as part of their business activities, instead of the existing employment contracts, is particularly interesting.
Importantly, this phenomenon carries a risk not only for the IT specialists themselves, but also for companies that previously employed them on the basis of an employment contract. The definition of a tax advantage contained in the Tax Ordinance is very broad and it also includes the lack of an obligation to collect the tax by the payer.
Taxpayers who undertake or plan to undertake restructuring measures should also be on guard. Although the tax authority bears the burden of proving that a given tax advantage is not the result of activities of an economic and business basis, but the main or one of the main objectives of the taxpayer’s activities is the tax benefit, such taxpayers should independently ensure proper business and economic justification for their activities.
In order to avoid the negative consequences of the actions taken to achieve tax optimization, it is worth applying to the competent authority for a protective opinion. Obtaining the opinion is a security for the taxpayer that will allow him to avoid applying the GAAR clause to him, but at the same time it is not a cheap solution, because the application fee is 20,000 zloty.
The second solution that will protect the taxpayer against negative consequences is applying for an individual interpretation. However, if the director of the National Tax Information finds that the actions described by the applicant are tax avoidance, he will refuse to issue an individual interpretation.
The GAAR clause is primarily intended to protect the tax system against unjustified tax avoidance practices. It is an instrument that the authorities can also use to limit the circumvention of the provisions of the “Polish Deal”.
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