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i Tax audit

As a Polish tax law general rule, taxpayers in Poland pay their taxes on a self-assessment basis (by filing their value added tax (VAT), corporate income tax (CIT), personal income tax (PIT) or transfer tax return). A small number of tax obligations arise from decisions issued by the tax authority.

For the above reason, the practice of tax auditing is growing. The main purpose of a tax audit conducted at the tax authority's initiative is to examine the accuracy of taxpayers' settlements. A taxpayer must be notified by the tax authority that a tax audit is to be conducted. The tax audit is initiated no earlier than seven, and no later than 30, days from service of the tax audit notice. In certain circumstances, a tax audit may be conducted without prior notification (e.g., a fiscal or commerce offence has been committed).

In most cases, the tax audit is conducted at the audited taxpayer's registered office or another location where the business activity is performed, or at locations where documents are stored. Therefore, the audited taxpayer should be present while a tax audit is conducted.

The audited taxpayer has the right to actively take part in the tax audit. Particularly, the taxpayer may submit clarifications, present evidence or demand consideration of certain documents or witness hearing. The audited taxpayer should cooperate with the tax authority to allow it to perform its task effectively (e.g., provide access to documentation and necessary clarifications).

The tax audit must be conducted within the period indicated in the authorisation (i.e., a document authorising the tax authority to initiate a tax audit). According to the Business Freedom Act, the duration of all audits of a business entity conducted during a single calendar year cannot exceed the following:

  1. micro-enterprises: two business days;
  2. small enterprises: 18 business days;
  3. medium-sized enterprises: 24 business days; and
  4. large enterprises, 48 business days.

An audit is deemed concluded on the date of delivery of the audit report, which consists of a description of facts and a legal assessment of the case, but which does not constitute a tax liability. When the audited taxpayer does not agree with the audit report, it may submit reservations or clarifications within 14 days of service of the report. The authority is obliged to review the taxpayer's reservations and clarifications within 14 days of receiving them from the taxpayer. It should be noted that the taxpayer may not correct a tax return while a tax audit is being conducted. This right is suspended until the delivery of the tax authority's conclusion of a tax audit protocol where all irregularities are indicated. Tax proceedings may be commenced by the tax authority if the audited taxpayer does not correct the tax return.

ii Tax proceedings

The main aim of the tax proceeding is to settle a case by issuing a pertinent decision. To issue the pertinent decision, the tax authority will establish the case facts, collect the most important evidence and make the most appropriate tax assessment. In most cases, tax proceedings are initiated by the tax authority when a tax audit reveals irregularities on the side of the taxpayer (e.g., tax arrears, undisclosed income or improper tax return). Tax proceedings may also be initiated upon application of a taxpayer. There are two stages involved in tax proceedings: generally, at the first instance, the tax authority is the head of the tax office; and at the next instance (the upper instance), the tax authority is the director of the tax administration chamber. The date on which proceedings are initiated by the tax authority is the date that the taxpayer is served with the decision to initiate proceedings. A taxpayer has a right to actively participate at each stage of the proceedings (e.g., make demands, comment on the evidence and other materials in the case prior to issuance of a decision, inspect case files).

On the other hand, the tax authority may take all essential actions to clarify all facts during the proceedings and, when it is possible, should resolve the case at first instance. Moreover, the tax authority should provide a taxpayer with all necessary information and clarifications concerning the case.

As previously mentioned, the tax authority issues a proper decision at the end of the tax proceeding. However, within seven days of delivery of the notification from the tax authority and prior to the issuance of that decision, the taxpayer has a right to comment on the evidence and materials.

Every tax decision made at the first instance of proceedings may be appealed and heard at the upper instance (mostly by the director of the tax chamber). To appeal a tax decision, the appeal should be submitted within 14 days of the date of delivery of the decision. A decision is final if a taxpayer does not file an appeal within this time period, and the tax proceeding is then final.

In cases where an appeal is submitted to the upper instance, the upper instance tax authority will settle the case, and its decision will be final and enforceable. That final decision may be challenged by lodging a complaint to the (provincial) voivodship administrative court (further court proceedings are described in Section III).

iii Customs and tax audit

In addition to a tax audit, Polish tax law also recognises a customs and tax audit, which concerns more serious matters than tax audits conducted by tax offices. It may be conducted only at the initiative of a tax authority – the head of the customs and tax office (which acts more like a 'tax policy'). A customs and tax audit differs from a tax audit because:

  1. it is started with no prior notification: namely, it starts with the delivery of the authorisation to perform it;
  2. the taxpayer has right to correct a tax return in the scope covered with the tax audit within 14 days of the date of the tax audit authorisation delivery; and
  3. the Business Freedom Act rules do not apply to it, namely there are no limits on simultaneous audits, no limits on the duration of audits and no possibility to file the opposition to the incorrect initiation or conduct of the audit.

The customs and tax audit ends with the audit result. Within 14 days of the date of delivery of the result, the taxpayer may adjust the tax return covered by the audit. However, it should be noted that the draft amendment to the Act on the National Fiscal Administration assumes that a taxpayer who will correct the declaration in accordance with the result of customs and tax control and pay the tax will not be able to submit a correction later, questioning the findings of these controls.

If no irregularities were found during the audit or the taxpayer corrected tax returns accordingly to the result, no tax proceedings are initiated. However, if irregularities have been found as a result of the audit and the tax return has not been corrected within the prescribed period, the audit is automatically transformed into a tax proceeding. Such tax proceeding, performed by the head of the customs and tax office, may result in a decision from which the taxpayer has right to appeal. The appeal is lodged within 14 days to the same body that issued the decision. The case is re-examined by the same authority and also ends with a decision, on which the taxpayer may file a complaint to the administrative court.

iv Rulings

An individual tax ruling is a very important tool for taxpayers in the Polish tax law system. The main aim of the ruling is to allow a taxpayer to apply to the tax authority for a ruling on whether any planned or actual taxpayer actions, arrangements or transactions comply with the law. As from 2016, an application for a tax ruling may be submitted jointly by two or more taxpayers participating in the same transactions or events. A tax ruling is binding for the tax authorities but not for the taxpayer. In other words, as a rule, tax authorities may not challenge tax settlements of a taxpayer following the letter of the ruling. Confirmation of a taxpayer's standpoint protects a taxpayer from criminal liability and from the obligation to pay interest on tax arrears in cases where the tax authority changes its point of view on that particular matter. Moreover, the biggest advantage of an individual tax ruling is that it may protect a taxpayer from paying tax in circumstances where the taxable event has not already taken place. If the taxpayer obtains an unfavourable tax ruling, they may appeal to the voivodship administrative court.

It is noteworthy that from 15 July 2016, the tax authorities will not issue rulings in cases where a potential transaction, action or arrangement raises a justified suspicion that it may be subject to the Polish GAAR or may constitute an abuse of law under the VAT Act. It should be noted that Polish tax authorities willingly make use of the above argument and refuse to issue a tax ruling relying on potential abuse of tax law. However, the taxpayer has a right to apply for a protective opinion regarding such planned transaction, action or arrangement. A protective opinion will be issued in cases where there is no danger of the GAAR's application. The fee for obtaining such opinion is far more costly than for obtaining an individual tax ruling (a tax ruling costs 40 zlotys, a protective opinion 20,000 zlotys).

The issuance of such opinion also takes much longer than the issuance of the tax ruling (approximately six months; a tax ruling is issued within three months).

From 2019 the tax authorities may revoke individual tax rulings obtained in the past if they were aimed at circumventing the law or they allowed optimisation measures to be taken in an artificial way or without economic justification and in consequence allowed the taxpayer to obtain a tax advantage. This means that in many cases the obtained individual tax rulings will no longer grant protection for taxpayers. Moreover, the subject of the request for interpretation cannot be the provisions to prevent tax avoidance, which relate, inter alia, to: GAAR, abuse of law in VAT, conduct of actual activity (CFC), measures limiting contractual benefits, specific anti-abuse rules (SAARs),, etc.