Poland: New obligatory report concerning fulfilment of tax strategy by the end of 2021
Tax Poland Commentary
The provisions of the CIT Act, which came into force on 1 January 2021, oblige taxpayers with revenues exceeding EUR 50 million and tax capital groups, to prepare and publicly announce a tax strategy report.
According to the position of the Polish Ministry of the Finances (MF), which is controversial due to the lack of relevant transitional provisions within the new regulation, the first year to which the new obligation applies is 2020, and the relevant report should be prepared (and publicly announced) by the end of 2021.
The task described above is definitely not made easier by the lack of an existing definition of tax strategy. Guidance as to what to include in the tax strategy can be found in a document published by the MF describing the requirements for taxpayers who wish to participate in the implementation of the so-called co-operation programme with the tax administration.
Scope of the strategy to be reported
Taking into account both the aforementioned guidelines and the limited scope of the report indicated by the legislator, tax strategy can be understood as both the values and objectives set by the particular taxpayer (this will usually be ensuring the level of taxation provided for by the tax law) and the methods of achieving them. Such a broadly understood tax strategy consists of a number of very different elements, in particular:
identification of the entity's relationship/approach to risk,
definition of tasks, roles, responsibilities in the process of fulfilling tax obligations,
procedures for determining tax consequences of planned/executed business operations and the inclusion of these consequences in business decisions,
the flow of information between the relevant departments of the organisation, the accounting of documents in order to meet tax obligations,
day-to-day supervision/consultation and follow-up of processes that have an impact on tax obligations,
involving the management body in the decision-making process,
reporting and filing of returns,
monitoring changes in legislation and staff training
Scope and depth of the strategy is not the same for all taxpayers, and it should be adapted to the size and structure of the enterprise.
According to the guidelines publicized by MF, the strategy should take the form of a document, have the approval of the management board and the supervisory board and be subject to regular internal review.
Contents of the mandatory report
Report on the implementation of tax strategy should be prepared by the end of the following fiscal year for the previous one. The minimum scope of the report should include information on:
processes and procedures to manage the execution of tax obligations,
restructuring measures selected, planned or undertaken by the taxpayer,
transactions with affiliated parties exceeding 5% of the value of the assets,
voluntary forms of cooperation with the tax authorities,
number of MDR notifications,
information on applications for tax interpretations and similar tools,
transactions with entities from tax havens.
The report on the implementation of the tax strategy may not contain information covered by commercial, industrial, litigation or professional secrecy.
Failure to comply with the obligation to prepare and implement tax strategy and subsequently report will it be subject to an administrative penalty of up to PLN 250,000.
In practice, preparation and acceptance of a tax strategy in a all-purpose manner within a company relates to this particular organisation and, will require taking a number of actions, starting from identification and mapping of existing processes relating to discharge of tax obligations through their verification and modification, to the establishment of new procedures, such as the preparation of a tax strategy implementation report.
In practice, the information provided to the tax authorities can be used to select a particular taxpayer / group of taxpayers for a possible audit and, in case of irregularities identified, serve as evidence to identify the person(s) responsible.
If you wish to discuss the changes and the necessary actions in this regard, we remain at your disposal.