Legal certainty and interpretation doubts
Legal certainty and interpretation doubts
The topic that is particularly evident when presenting changes in income taxes from January 1, 2018 is the issue of precision and clarity of the new regulations.
The objective of introducing at least part of the regulations was explicitly stated in the justification to the draft law amending the provisions of the Act on personal income tax and legal persons. They could be divided into several groups:
A. Changes "sealing" the tax system
This goal is indicated as the main purpose of the amendment. Its justification is to prevent the possibility of tax avoidance by choosing the method of conducting a given transaction or the form of running a business. In the opinion of project originators, resulting from art. 84 of the Constitution, the principle of the universality of taxation does not allow the application of different taxation rules in relation to events with an economically identical effect. In addition, one should not allow a situation in which only large entities in a potentially big tax "ready to declare" would benefit from the possibility of tax-profitable shaping of their economic situation. Finally, the project authors add that the increased tax receipts from taxpayers who have so far understated their tax result will give the possibility of a more complete implementation of the state's economic policy.
B. Amendments introducing the Council Directive of July 12, 2016 establishing provisions aimed at counteracting tax avoidance practices that have a direct impact on the functioning of the internal market.
In this regard, the need to implement the provisions of the Directive was established, the purpose of which is to increase the efficiency of national corporate income tax systems so that taxes are paid at the place where profits are generated and value is generated. What is to lead to achieving this goal is the introduction by the European Union legislation of legal solutions (institutions) that counteract the so-called tax optimization schemes.
The introduction of the above principles in the provisions of tax acts is an element of the State's tax policy, being one of its prerogatives. It should be noted, however, that regardless of the intentions of the legislator, the rights of the taxpayer resulting from constitutional norms should also be secured. In particular, it is about the principle of correct legislation (certainty of legal regulations). In the case of tax law, these principles are specified in art. 84 and art. 217 of the Constitution. The first of the above-mentioned provisions of the Constitution provides for an order to precisely determine in the Act all the essential elements of the ratio of the tax. On the other hand, the second of those provisions indicates, in relation to which elements of the ratio in question (entities, subject, rates, principles of granting allowances and redemptions and categories of exempt entities), the obligation under consideration is of a special nature.
From this perspective, at least a few examples should be pointed out, which may cause that taxpayers will not have the comfort of certainty as to an adequate transformation of tax regulations.
- There is no legal definition of the interest part of the leasing contracts as part of the costs of debt financing and the foreign controlled company, including the lack of delimitation of operating and financial leasing terms on legal grounds. The Act on Corporate Income Tax does not contain a legal definition of a leasing. This definition is only found in the NAS No. 5 [national regulations] and IAS 17 (EU regulations). Obviously, this leads to problems related to taxpayers' recognition of the interest part of the operational leasing installment as tax deductible costs (in tax terms).
- Lack of coherence in the scope of art. 12 clause 1 point 7 of CIT, where the literal wording of the provision indicates that the transaction consisting in making cash contributions to the company would be taxable. In order to dispel doubts in this respect, a draft amendment to the Law is being prepared (currently at the stage of the Standing Committee of the Council of Ministers). According to this draft, the more specific provision stipulates that cash contributions to companies and cooperatives are not taxable. Currently, only the general tax ruling of the Minister of Finance of March 2, 2018 indicates that the above provision (in the version prior to the planned amendment) does not cover the cases of making cash contributions to the company or cooperative.
- Imprecise regulation of art. 15ca of CIT. The wording of the provision by the legislator leads to a situation where the provision in the literally understood wording applies only to cases where debt financing costs exceed the value of debt financing determined according to market creditworthiness, i.e. a situation where interest for a given year is higher than debt for the same period. Therefore, draft of another amendment to art 15ca, consisting in excluding from tax costs the interest cost of financing exceeding the creditworthiness of a given taxpayer has been prepared.
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