“One of the key features of a business-friendly economic system is stability and predictability of the legal system. Laws and regulations, among other things, establish a system basis for conducting business activity, they define rules of conduct between entrepreneurs, as well as between companies and public institutions, including fiscal authorities.
It is clear that conducting a business activity always involves risk, and the role of legal regulations is, among other things, to clearly define the rules of the market game and minimize risk where possible.”
The above theses were presented in the parliamentary question No. 31350, submitted by Ms. Aldona Młyńczak, addressed to the Minister of Finance on May 20, 2019.
This parliamentary question was submitted in connection with tax proceedings that ended with the tax authorities’ decision ordering the taxpayer to return several million zlotys worth of VAT, which the taxpayer received a few years earlier. This occurred while the taxpayer already held a tax interpretation issued a few years earlier confirming his/her right to receive the above amount.
Ms. Aldona Młyńczak, concerned about the tax authorities violating the key principles of certainty of economic transactions, decided to ask the Minister of Finance, among other things, what actions will be taken by the Ministry of Finance to ensure greater consistency and coherence of tax interpretations.
While considering both the above mentioned parliamentary question, and media coverage of this tax case, the question arises whether individual tax interpretations protect taxpayers at all in the current state of law.
Taking into account the taxpayer’s negative experience with tax authorities, is it still worth applying for individual tax interpretations and seeking to “secure” one’s rights in this form?
In order to answer this question, it is first of all necessary to determine the scope of taxpayer’s protection resulting from obtaining an individual interpretation, and, in particular, in what circumstances such an interpretation protects against payment of taxes under the current legal system.
According to Articles 14k, 14l and 14m of the Tax Ordinance, protection resulting from the received interpretation includes not only lack of interests and responsibility for the fiscal offence or misdemeanor, but may also protect a taxpayer from paying taxes.
It should be emphasized that the rule presented above will apply should a taxpayer receive an interpretation which concerns future circumstances yet to occur.
If a question posed in the application for interpretation refers to circumstances that have already occurred, the protective capacity of such an interpretation will be smaller.
In such a case, compliance with the interpretation will protect the taxpayer from paying interests and from fiscal and penal responsibility; however, such interpretation will not protect the taxpayer from paying taxes.
Notwithstanding the literal wording of the regulations discussed above, it seems that tax interpretations are losing their protective function.
The practice of tax authorities themselves leads to such a conviction.
A growing number of tax or control proceedings end with the fiscal authorities recognizing that the circumstances presented by taxpayers in their applications for interpretation, later prove to be inconsistent with the actual circumstances the fiscal authorities determine in the course of control.
This leads to a situation where tax authorities question individual interpretations held by taxpayers and do not recognize positions contained therein, thus such interpretations held by taxpayers lose their “protective” character.
Some “help” for holders of tax interpretations may be derived from a judgement of the Supreme Administrative.
The Supreme Administrative Court, in its judgment of January 28, 2019, case no. I FSK 293/17, stated that tax authorities may not issue interpretations on the basis of a description of the situation they find as being sufficient to take a position and then challenge such description as inconsistent with reality, based on elements irrelevant to the case.
Moreover, according to the Supreme Administrative Court, “the no-harm principle, expressed in Article 14k § 1 of the Tax Ordinance, as derived from the constitutional principle of trust in the authority, realizes the guarantee character of tax interpretations. The derogation from the rule of Article 14k § 1 of the Tax Ordinance should therefore be an exception and not a rule. In any other case it violates the principle of certainty as to the application of law.”
The question: “whether an individual tax interpretation protects the taxpayer?”, despite the practices of tax authorities as presented above, which were assessed as unfair, must be answered in the affirmative.
It will be much easier for taxpayers to defend themselves against excessive fiscalism, having the possibility to refer to the tax interpretation received, and above all, having the possibility to refer – on the basis of such an interpretation – to the principle of certainty as to the application of law, which has a protective function in the course of criminal and fiscal proceedings.
In future publications we will present examples and discuss both actual circumstances and examples of interpretations in the field of real estate taxation, which will confirm the thesis presented above that it is advisable for taxpayers to apply for an individual tax interpretation.
Tomasz Bielenik
Adwokat, Doradca podatkowy | Attorney at Law, Tax Advisor
T: +48 22 447 43 00
K: +48 502 793 152
E: bielenik@millercanfield.com
Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield, and is based on the facts and guidance available at the time of its release which may be subject to change. The purpose of the publication is to draw attention to the legal events indicated in it and should not be the sole basis for any decision regarding a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant legislation or other legal development to the particular facts can be verified.