The new Tax Ordinance

A dedicated Codification Committee for General Tax Law took five years to prepare the proposal of the new Tax Ordinance. The document contained nearly eight hundred articles and was expected to become law on 1 January 2021. It aimed at superseding the Tax Ordinance of 1998, which has been amended on numerous occasions.

The new Tax Ordinance was officially justified by the need for measures to ensure a balance between public interests and the interests of taxpayers. The bill proposed to ensure increased protection of taxpayers in dealing with tax authorities. It proposed changes regarding two main areas, i.e. protection of the rights of taxpayers and improvement of the efficiency of tax collection.

The new Tax Ordinance proposed to introduce new general tax principles: the principle of providing information and offering support, the principle of impartiality and equal treatment, the principle of presumption of taxpayer honesty, and the principle of reasonable expectations.

The principle of providing information and offering support would require tax authorities to provide taxpayers with information and support to help them comply with tax regulations voluntarily and exercise their rights under such regulations. The principle was expected to apply not only in formal tax proceedings and in connection with the subject matter of such proceedings, but also to all kinds of tax provisions, including provisions of material tax law.

The principle of impartiality and equal treatment was proposed as an addition to the existing principle of trust, to ensure that equal treatment is applied to all taxable persons with the same factual and legal circumstances in the same matter, and to all taxable persons in respect of separate matters with similar factual and legal circumstances.

The principle of presumption of taxpayer honesty assumed that taxpayers are ready to cooperate and, as long as they understand the provisions of tax law and consider tax procedures to be fair, to act in a lawful manner.

Last but not least, the principle of reasonable expectations would require tax authorities to make consistent decisions on matters with the same factual and legal circumstances unless a valid reason exists to depart from the consistency policy. This was expected to make the decisions of the authorities more predictable.

The new Tax Law Bill also proposed several measures to help resolve tax disputes consensually or to prevent such disputes altogether. Examples include tax agreements with mutual concessions where the tax authority and the taxpayer reach an agreement on a tax issue to the extent permitted by law; mediation procedures to facilitate communication between tax authorities and taxpayers; or consultations for, in particular, taxpayers that have completed complicated business transactions (e.g. legal form conversions) and are not certain if they have not made any errors that might result in adverse tax implications.

The main difference between the proposed consultation measure and what is already available and known as 'individual interpretation' is that the former would have been used by the tax authority to examine the records relating to a transaction and to determine, by way of a formal decision, whether or not the related tax settlements were accurate.

The new Tax Law Bill proposed also to improve the efficiency of tax collection, by improving the quality of the existing tax evasion provisions, introducing new rules for the expiry of tax assessments and for tax collection, permitting tax authorities to issue determinations of overpaid tax in partial decisions or after the expiry of a tax liability, introducing more efficient tax procedures (a simplified procedure, a representative procedure), streamlining the existing extraordinary procedures for repealing or amending final administrative decisions, providing for precise criteria for immediate enforcement of decisions, streamlining the procedures for the imposition and reduction of penalties, and modifying the rules of issuing tax interpretations.

The Ministry of Finance said in a statement a few months ago that a detailed review of the previous proposal would be necessary before it was presented to Parliament again. The purpose of the review would be to verify the relevance of the bill proposal in the light of the recent amendments to existing regulations and in terms of vacatio legis requirements. The Ministry of Finance states that some regulations need to be streamlined and made easier for taxpayers to comply with. A review of the proposal will be the basis for a new plan of legislative work. It is unknown when the new Tax Ordinance will be re-presented to Parliament or what new provisions will be proposed.

Łukasz Kupiec,
Assistant Manager in the Tax Litigation Team at KPMG in Poland

Dominika Meller,
Consultant in the Tax Litigation Team at KPMG in Poland