To counteract tax evasion, Poland has recently introduced legislation allowing the tax authorities to block suspicious bank accounts.
One of the new laws introduces a computerized clearing house system under which banks and credit unions are obliged to report information regarding the accounts they maintain (e.g., openings, changes, and transactions) to the system on a daily basis. Using algorithms that take risk criteria into account (e.g., economic, geographical, behavioural, and business connections), the system calculates a risk ratio for each entity and passes that information on to the tax administration. The tax administration may block a bank account if the analysis indicates that there is a risk that the account holder has committed or is about to commit fiscal fraud.
The obligation to process bank account data in the system and the mechanism of bank account blockage concerns only one type of bank account under Polish banking law, namely settlement accounts.
A bank account can be blocked for a period of no longer than 72 hours from delivery of the tax administration's decision to the bank. Although the decision is discretionary, it should be justified by past tax performance of the account holder, and, based on such performance, an assumption that the account holder may use the account for fraud related purposes, and that the blockage of the account is necessary to counteract fraud. The initial 72-hour blockage may be extended to three months should the tax administration identify a risk that existing or future tax obligations of the account holder will not be performed.
During the blockage period, an affected bank account may not be subject to new security interests. It has not been specified whether existing security interests (e.g., a financial pledge) expire or are suspended or continue to apply during the blockage period.
The risk of a bank account being blocked under the new law may have an effect on escrow accounts that are commonly used in financing, real estate and M&A transactions. Escrow accounts are typically opened with the banks by buyers as settlement accounts used to centrally clear various (and often numerous) payments associated with a transaction (the sequence and immediate performance of respective payments being crucial elements of the transaction). The sources and uses of these payment arrangements can be very complex and the tax authorities may, therefore, consider payments into or from an escrow account as having the potential of financial fraud. In a worst-case scenario, money could be blocked in a buyer's account even though the title to shares or real property has already been transferred.
The risk of an escrow account being blocked may be minimized by conducting a tax due diligence on the buyer (the escrow account holder), which should include a tax clearance certificate and, most importantly, a check of the account holder's VAT status. While these measures provide a certain degree of comfort, they do not entirely eliminate the risk of an account being blocked.
In lieu of escrow accounts, we believe that parties should consider using trust accounts to settle their transactions. Trust accounts are not subject to the reporting obligations under the new laws and cannot be blocked by the tax administration. Furthermore, amounts deposited in trust accounts may not be seized in enforcement and insolvency proceedings over the account holder. Additionally, there may be contractual measures between the account holder and the bank which may further enhance the holder's position. Consideration should also be given to including provisions dealing with the possibility of an account blockage into transaction documents.