From January 1, 2019, tax authorities have gained the right to impose additional tax liabilities on taxpayers in connection with the improper fulfillment of tax obligations or in connection with tax avoidance. The basic amount of sanctions will range from 10% to 40%. The above change results from the amendments of the Tax Ordinance (Chapter 6a).

In certain situations tax authorities will determine not only the amount of understatement of the tax liability, but also the amount of additional tax liability, which will be a kind of tax avoidance penalty. An additional tax liability may be imposed only in the event of issuance of a tax decision regarding:

• the application of a tax avoidance clause,
• provisions regarding measures limiting contractual benefits,
• special clauses regarding the benefits obtained in the case of a merger of companies (where the main purpose was to avoid taxation),
• a special clause regarding dividend payments and exclusion of an exemption,
• in the area of transfer pricing regulations and
• in the scope of statements made in connection with the payment of the withholding tax.

The rate of the additional liability amounts, generally, to 10% of an overstated tax loss or understated taxable income within personal and corporate income taxes, and in case of the withholding tax – 10% of the payment. In case of tax avoidance within the scope of other taxes, the additional liability rate amount to 40%.

In the opinion of the tax authorities, the new regulations should first of all serve as a preventive measure, and the possibility of applying a severe punishment is to discourage taxpayers from undertaking actions aimed at tax avoidance or the use of non-market prices.

⇒ Exception:

According to the provisions it is possible to use the exclusion of the application of the sanction rate. The tax authority may give up the determination of an additional tax liability if it assesses that the taxpayer acted in good faith, i.e. remained in the wrong but justified belief that the tax benefit obtained by him was subject to the object and purpose of the tax provisions. This may be indicated, in particular, by the fact that the taxpayer does not carry out business activity or runs the business activity on a small scale and therefore, it was not expected that he would use professional tax advice.

An additional tax liability shall not be applied to a natural person who is liable for a tax offense for the same act.

⇒ Note:

In certain cases, these sanctions can be multiplied: doubled (e.g., when the basis for determining an additional tax liability exceeds PLN 15 million or if the taxpayer has failed to provide the tax authority with transfer pricing documentation) or even tripled, in case of the concurrence of several premises and reach 80 percent of the tax benefit.

The rates are halved in the case of a decision specifying the conditions under which the effects of tax avoidance will be reversed. Such a decision is issued at the request of the taxpayer. The application itself will have to be drawn up and signed by a professional representative - tax advisor, attorney or legal advisor.