Obligation to prepare and publish information on the execution of tax strategy
On January 1, 2021, came into force the regulations providing for the obligation to prepare and publish on the website information on the tax strategy executed in the previous fiscal year. This obligation was imposed on the largest business entities. Some of them will have to publish information on the executed tax strategy for the year 2020 already in 2021.
Below is information on how to properly prepare in order to meet the new reporting requirements and how we can assist you in the process.
Who is required to publish information about the executed tax strategy?
- Are obliged to publish information on the executed tax strategy:
- Tax capital groups - regardless of the amount of revenue earned.
- CIT taxpayers (other than tax capital groups) - only those with revenues exceeding the equivalent of EUR 50 million in a tax year.
- There are doubts as to whether branches of foreign companies with revenues exceeding EUR 50 million in the tax year are also obliged to publish information on their tax strategy. Until this issue is clarified by the Polish Ministry of Finance, for tax security purposes we recommend that such entities prepare information on the executed tax strategy or confirm the absence of such obligation by obtaining an individual tax ruling.
Where information about the executed tax strategy should be published?
- On the taxpayer's website or on a related party's website.
- Information about the address of the website on which information about the executed tax strategy is published must also be provided to the Head of the tax office competent for the taxpayer.
When information about the executed tax strategy has to be prepared and published?
- By the end of the last day of the 12th month following the completed fiscal year.
- The amending law does not provide for transitional provisions. However, we would like to highlight that the Ministry of Finance recently published a release stating that the reporting obligation already applies to the 2020 tax year. Thus, CIT taxpayers who operate as tax capital groups or those who exceed the revenue threshold of EUR 50 million and at the same time their tax year is equal to the calendar year should, as a rule, publish information on the execution of the 2020 tax strategy by the end of 2021.
What should be included in the information about the executed tax strategy?
- According to the new regulations, information on the executed tax strategy should include data from the following areas, in particular:
Area | Data to be reported |
Processes and procedures | Processes and procedures for managing and ensuring the proper performance of tax law obligations. |
Forms of cooperation with the National Tax Administration | Voluntary forms of cooperation with National Tax Administration authorities. |
Fulfilment of tax obligations | Information on the execution of tax obligations by the taxpayer within the territory of the Republic of Poland. |
Mandatory Disclosure Rules | Information on number of communications on tax schemes submitted to the Head of the National Tax Administration, broken down by taxes to which they relate. |
Related party transactions |
Transactions with related parties whose value exceeds 5% of the balance sheet total of assets, within the meaning of accounting regulations, determined on the basis of the last approved financial statement of the company, including entities not being tax residents of the Republic of Poland.
|
Restructuring | Planned or undertaken restructuring activities that may affect the tax liability of the taxpayer or related parties. |
Applications filed with tax authorities | Information about applications submitted by a taxpayer for the issuance of:
|
Tax Havens | Information regarding the taxpayer's tax settlements in territories or countries with harmful tax competition. |
- The data should be reported taking into account "the nature, type and size of the business". Therefore, it should be expected that e.g. in the case of entities conducting diversified activities or activities of a very large scale, the tax office may expect that the information on the executed tax strategy will be extended by additional elements in comparison with those explicitly indicated in the CIT Act.
What practical difficulties does the new legislation raise?
- No template for information on the executed tax strategy - the Ministry of Finance has not prepared a template for information on the executed tax strategy, nor its form; nor has it indicated how much detailed data it has to contain.
- The new regulations are imprecise in many places - this gives rise to doubts as to what data should be reported. The catalogue of elements specified in the CIT Act, which should be included in the information on the executed tax strategy, is open in nature. This means that even if the taxpayer includes all the information components specified in the CIT Act, the tax authorities may still deem the published information to be incomplete or defective due to the failure to report other data specific to a given activity.
- Preparing information in a way that does not disclose business secrets - a big practical problem may be reporting data in a way that, on the one hand, will allow to meet the requirements arising from the CIT Act and, at the same time, will not disclose business secrets (e.g. restructuring plans, the description of which is to be one of the elements of information on the executed tax strategy).
- Taxpayers are not prepared for 2020 reporting - the Release of the Ministry of Finance, which implies the obligation to prepare information on the execution of the tax strategy as early as 2020, comes as quite a surprise. In many companies, tax procedures and processes have not been written down until now, and therefore, preparing to report information on the tax strategy executed in 2020 can be quite time-consuming and demanding.
What are the penalties for failing to publish information about the executed tax strategy?
- The Head of the tax office may impose on the taxpayer a penalty of up to PLN 250,000 for failure to comply with the obligation.
How to get prepared for the new regulations?
- The obligation to publish a tax strategy can be used to structure the tax management issues within a company. The benefits that the new regulations may bring may be the systematization of tax processes and procedures, which should translate into a reduction of tax risks and increased comfort of employees dealing with tax matters in the company.
- It is recommended to start preparing early, as the 2020 release requires an analysis of the company's processes and procedures over the past fiscal year.
- As the information about the executed tax strategy is subject to public publication, the announcement made by the company may be an opportunity to build its image among investors and counterparties as a "socially responsible" entity.
What kind of support can we offer?
Audit of tax procedures and processes applied by the company
- In the course of the control, the tax office may check whether the information published by the company is consistent with the activities actually undertaken by the company.
- Therefore, in our opinion, preparation of information on the execution of the tax strategy should be preceded by an audit of the procedures and processes applied by the company.
- During the audit we will:
- identify the tax processes and procedures applied by the company so far,
- map the existing tax processes and procedures,
- identify areas where we believe the procedures used are incomplete, incorrect or ineffective,
- suggest additional tax processes and procedures, if we determine that it would be advisable to implement them in the company.
- Our work will result in a summary report.
Development of a tax strategy document
- For this area of support, we will develop a tax strategy document, taking into account:
- new CIT regulations,
- "Guidelines on the framework for internal tax supervision" developed by the Ministry of Finance, and
- the activities actually undertaken by the company in terms of tax management.
- The tax strategy document will be usable by the company in subsequent fiscal years as well.
- Please note, however, that the tax strategy document may need to be updated in the event of a change in the tax legislation/approach of the company or the Group in which it operates. We can then prepare appropriate modifications to the tax strategy at the company's request.
Support in the preparation of information on the executed tax strategy for 2020
- As part of this scope of support, we will prepare, in cooperation with the company, a draft of the information on the executed tax strategy for the year 2020, which - according to the new regulations - should be published on the taxpayer's or related entity's website.
- The template of the information on the executed tax strategy will be developed by us in a way taking into account the requirements included in the CIT Act and will be able to be used by the company when reporting in subsequent tax years.