As a rule, there must be a legally defined characteristic or set of characteristics of an arrangement for a tax scheme to arise. The shape of these characteristics also defines what type of scheme a taxpayer may be dealing with.
Under the MDR legislation, there are three types of tax schemes:
In the context of arrangements meeting conditions 1) or 2), it is possible to identify a cross-border and a non-cross-border (domestic) tax scheme. A cross-border scheme is most often created when at least one of the participants in the scheme is established in a different country from the others. It is worth recalling that the correct identification of whether a scheme meets the cross-border condition determines the further course of the MDR analysis, as this occurs in a completely different context for domestic schemes.
If the arrangement does not meet the cross-border criterion, only a domestic scheme may occur. However, an eligibility criterion still needs to be met by the beneficiary in order to be required to report a domestic scheme.
The criterion of a qualified beneficiary is deemed to be met if:
Values in euros should be converted to zlotys at the average exchange rate announced by the National Bank of Poland on the last day of the calendar year preceding the year in which the event giving rise to the obligation to provide information on a tax scheme other than a cross-border tax scheme occurred.
Only once an entity has met the criterion of a qualified beneficiary is it possible to recognise a non-cross-border tax scheme.
Operating leasing can fulfil several characteristics of a tax scheme. Among these we can distinguish:
I. Other special identifying characteristics (Article 86a § 1(1) of the Tax Ordinance):
1. the impact on the deferred portion of income tax or deferred tax assets or liabilities arising or expected to arise upon the execution of the arrangement at the beneficiary is significant to the entity within the meaning of the accounting regulations and exceeds PLN 5 000 000 during the calendar year,
If leasing is recognised as operating leasing for tax purposes and finance leasing for accounting purposes, deferred tax liabilities or assets will, in principle, arise. The creation of deferred tax assets/reserves may be accompanied by the need to report a tax scheme if their amount exceeds PLN 5 million.
2. the payer of income tax would be obliged to withhold tax above the amount of PLN 5 000 000 during the calendar year if the relevant double taxation treaties or tax exemptions did not apply to payments arising from or expected in connection with the execution of the arrangement,
If payments from a foreign leasing contract qualify for withholding tax exemption, the feature described above can be met.
3. the difference between the Polish income tax which would be due upon execution of the arrangement from the beneficiary not having its registered office, management or place of residence in the Republic of Poland, if that beneficiary were a taxpayer referred to in Art. 3 (1) of the Personal Income Tax Act of 26 July 1991 or Art. 3(1) of the Corporate Income Tax Act of 15 February 1992, and subject to actual payment of income tax in the country of the beneficiary's registered office, management or place of residence in connection with the performance of the arrangement, exceeds a total of PLN 5 000 000 during the calendar year;
Due to the separate treatment of the leasing contract under domestic law and the lessor's country of residence, differences in actual taxation are possible. If the differences between the hypothetical domestic income tax and the tax actually paid in the lessor's country of residence exceed PLN 5 million, this feature will be met.
At the same time, it is worth mentioning that the fulfilment of any of the other identifying characteristics does not trigger the obligation to recognise a cross-border tax scheme.
According to Article 86a § 1(12) of the Tax Ordinance, only domestic tax schemes may arise on the basis of other specific characteristics.
II. General identification characteristics (Article 86a § 1(6) of the Tax Ordinance):
1. the activities performed under the arrangement are based on substantially standardised documentation or take a substantially standardised form, which does not require significant changes to implement the scheme for more than one beneficiary.
The fulfilment of the above characteristic is the most common reason for lessors to recognise a tax scheme. Generally, the provision of an object under lease proceeds according to standardised operations and documentation. In the opinion of lessors, this most often means that the arrangement contains a general identifying characteristic and should be reported as a tax scheme.
2. there is a reclassification of income (revenue) to a different source of income (revenue) or a change in taxation rules that results in an effectively lower taxation, exemption or exclusion.
For operating leasing, it is possible to increase the tax deductible costs above the amount of notional depreciation on the leased asset. Such an action meets the definition quoted above, as it leads to actually lower taxation.
Even after meeting any of the above-mentioned general identifying characteristics, an operating leasing does not necessarily become a tax scheme. In order for a domestic tax scheme to arise, it is necessary to meet the criterion of a qualified beneficiary. An entity which has received information from a lessor about a notified domestic tax scheme should not send the Head of KAS information about the activities performed in connection with the implementation of the tax scheme if it does not meet the criterion of a qualified beneficiary. This restriction applies to both general and other specific identifying characteristics.
A domestic tax scheme will always arise if the criterion of a qualified beneficiary and a specific or other specific identifying characteristic is met.
If, on the other hand, the entity meets the criterion of a qualified beneficiary and only the general identifying characteristics are met, the scheme may not arise. An arrangement that meets only the general identifying characteristics must also meet the criterion of main benefit. However, according to Article 86a § 2 of the Tax Ordinance:
The main benefit criterion is considered to be met if, on the basis of the existing circumstances and facts, it is to be presumed that an entity acting reasonably and with legitimate objectives other than the attainment of a tax benefit could reasonably have chosen a different course of action, which would not involve the attainment of a tax benefit reasonably expected or resulting from the execution of the arrangement, and the tax benefit is the main or one of the main benefits that the entity expects to obtain from the execution of the arrangement.
The desire to obtain a tax benefit must therefore be the main or one of the main reasons for an entity to enter into a leasing agreement. In doing so, lessors do not verify that the lessee meets the main benefit criterion and report the tax scheme without a thorough analysis. Therefore, if the lessee is able to justify the economic reason for entering into the lease and indicate that the tax benefit did not play a significant role in the leasing decision, then, as a rule, the lessee will not be subject to MDR reporting obligations.
The deadline for submitting MDR-3 information regarding the tax schemes implemented for the 2020 - 2022 suspension periods passed on 1 August 2023. However, taxpayers still have time to submit MDR-1 information on overdue tax schemes. Due to unclear MDR rules, companies struggle to recognise the obligation. Often schemes remain recognised incorrectly and taxpayers face multi-million zloty fines.
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Tax scheme reporting (MDR)