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Poland's New Tax Office to Focus on Multinationals

Reproduced with permission from International Tax Monitor, 183 TMIN, 11/02/17. Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) <https://www.bna.com>

 

By Jan Stojaspal

 

 

Snapschot

  •  Key Taxpayers’ Service Center expected to launch April 1, 2018
  • Will cover 600 largest taxpayers, initially; expand to include some 3,000 entities

 

The Polish government is creating a special tax office that it says will help Poland's largest taxpayers navigate compliance issues, but local tax practitioners are concerned that the move will lead to tighter monitoring and perhaps more corporate income tax audits for multinationals operating in the country.

The special tax office, which is called the Key Taxpayers’ Service Center (COKP), is currently in pilot mode under the First Mazovian Tax Office in Warsaw. It's expected to launch in April 2018 as a separate entity reporting directly to the head of Poland's National Fiscal Administration.

Initially, the COKP will cover some 600 companies with annual net income from sales of goods, products and services exceeding 200 million euro ($232 million) but gradually expand to include more than 3,000 companies with annual income exceeding 50 million euro, the tax practitioners said.

Filip Switala, director of the tax system department at the Polish Ministry of Finance, said the COKP will offer a higher quality of service while helping “dissuade the multinationals from entering into unverified or aggressive schemes because the focus of the new center will be more horizontal and ongoing.”

“It surely will help to address the monitoring of dealings between related parties, because it is much easier for administration to gather the transfer pricing experts under one roof,” he told Bloomberg Tax in a Nov. 2 email. “This will also help multinationals because they will gain a counterparty to talk to,” Switala added.

‘New Approach to Large Taxpayers’

According to a spokesman for the National Fiscal Administration, the plan is to establish, as part of the COKP, industry-specific teams composed of specialists in taxes and accounting with “deep knowledge of the industry.”

“The aim will be to gather and develop knowledge about the application of tax laws and the functioning of key entities in particular branches of the economy,” the spokesman wrote in a Nov. 6 email to Bloomberg Tax. “At the same time, the teams will provide a comprehensive service to the taxpayer in course of all tax procedures (desk control, tax audit, tax assessment procedure).”

“The essence of a new approach to large taxpayers and the reasons of setting up a separate unit for their service lie in implementing new solutions tailored to the needs 11/9/2017 International Tax Monitor https://news.bna.com/itdm/display/batch_print_display.adp 2/3 of this group of taxpayers” and “to ensure that taxpayers fulfill their tax obligations correctly,” he added.

Increased Tax Controls Expected

Dariusz Galazka, partner, head of tax advisory at Grant Thornton Poland, welcomed the effort to build a tax administration that will “be a better partner to work with
large entities.”

“The large entities mainly need to have a competent partner to discuss tax settlements, acting quickly and efficiently,” he told Bloomberg Tax in a Nov. 3 email. “Business decisions, which are also influenced by tax settlements, must be made quickly. This concerns also efficient activity of tax authorities carrying out tax audits.
If these goals can be achieved, then it will be a great success.”

However, Galazka fears the benefits will be offset by stricter tax audits of corporate income tax (CIT) settlements.

“It is hard not to get an impression that the creation of the COKP is aimed at strict control of CIT settlements, in particular referring to optimization activities and transactions performed with related parties,” he said.

“For a long time, it has been heard that large entities, thanks to their aggressive tax policy and non-market transactions with related parties from foreign countries, decrease the base subject to CIT,” he said. “And the tax authorities that currently administer the large taxpayers are not able to cope with this issue. Therefore, in my opinion, during the first period of operation of the COKP, the large entities may expect that the number of tax audits will increase, in particular these audits may concern entities operating in international structures and/or entities that incur tax losses.”

‘Two Ways’

Piotr Liss, a tax partner at RSM Poland in Poznan, told Bloomberg Tax Nov. 8 that he expects stricter monitoring of the largest taxpayers, but didn't know whether it would
result in more tax audits.

“It makes sense for the biggest taxpayers to have a specialized tax office, but it all depends on how it's going to be organized,” he said.

“It is possible to organize it in two ways. One is user friendly, people who understand international business, people who know how international firms work worldwide. This, of course, would be perfect because we have huge problems with smaller tax offices that don't speak any foreign languages, that don't understand big business, that just look at the rules and keep to them strictly,” Liss said.

“The other way is: let's make things more strict, let's put in more controls and lets trace any payments which have been made abroad. Of course, the government will say things will be in the first way, but they will end up as the second. I am pretty sure it will end like this. The current government sees big business as a potential tax
evasive entity.”

Maria Kukawska, a Warsaw-based tax adviser and partner at Stone & Feather Tax Advisory, said that she didn't believe that stricter or more frequent tax audits “are the primary focus” of the special tax office.

“I would say that the first aim of this specialized tax office will be to generally understand and assist the biggest taxpayers with respect to the specifics of their operations in Poland,” she told Bloomberg Tax Nov. 8. “Of course, it will be far easier for this tax office to compare and understand the various business models and
operations of the biggest taxpayers in Poland, so surely they will also verify those taxpayers with respect to who should be subjected to tax inspections. But the focus is really to give the biggest taxpayers a helping hand in proper meeting of all the tax obligations that are imposed by the law.”

Regional v. Centralized Approach

Tomasz Misiak, senior manager, litigation, PwC Poland, said he believes an increase in tax controls is “possible” following the COKP's launch.

His main concern is, however, the loss of carefully cultivated relationships between taxpayers and their assigned tax administrators and that this could prove particularly disruptive. While tax administrators are regional, the COKP plans to serve all taxpayers from Warsaw, he said.

“People from the ministry of finance told me it's no problem, we'll organize a video conference,” he told Bloomberg Tax Nov. 2. But “taxpayers build a special unique relationship with a person. With the new tax office, this will be more difficult, especially for taxpayers from outside of Warsaw.”

”It will help tax administration to concentrate all the most important taxpayers in one place, but from a taxpayer point of view, this is more complex and more difficult,” he added.

 

To contact the reporter on this story: Jan Stojaspal at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com