Tax schemes reporting (MDR)

On 1 January 2019, an obligation to notify tax authorities of tax arrangement schemes entered into force. Information about tax arrangement schemes made available or implemented after 1 January 2019 should be filed within 30 days of making them available or starting their implementation.

The provisions of the Tax Ordinance introducing MDR were aimed at implementing EU Council Directive 2016/1164 (DAC6 Directive). Poland was one of the first countries in Europe which introduced the recommendations of the DAC6 Directive into the legal order and significantly extended the definition of tax arrangements covered by reporting, including e.g. the necessity to report domestic tax arrangements.

MDR - what is the scope of reporting obligation?

MDR concerns tax-planning schemes understood as an activity or a series of related activities in which at least one party is a taxpayer, or which have or may have an impact on the occurrence or failure of a tax obligation meeting the criteria specified in the Act. At the same time, those activities must meet the criteria indicated in the amended provisions - different for cross-border schemes and for domestic schemes:

• Domestic schemes will be subject to mandatory disclosure if the beneficiary of the scheme will be a qualified entity (revenues, costs or assets of the beneficiary or of its related party exceed €10 million, or the scheme concerns items or rights of market value exceeding €2.5 million). Domestic scheme must be reported if first activity concerning it had been made after November 1, 2018,
• Cross-border schemes will be subject to mandatory disclosure, regardless of whether the beneficiary is a qualified entity. Also, there is a duty to report certain information about tax scheme, e.g. detailed description, applied tax las provisions and expected value of tax benefit.  Cross-border scheme must be reported if first activity concerning it had been made after June 25, 2018.

Tax schemes reporting deadlines

On 1 July 2020, 30 June 2020 and 24 June 2020, the regulations of the three legal acts significantly modifying the obligations to report tax schemes (MDRs) came into force.

In accordance with the so-called Shield 4.0, the deadlines for providing information on tax schemes other than cross-border were suspended from 31 March 2020 until the 30th day following the date of cancellation of the state of epidemic hazard or the state of epidemic declared in relation to COVID-19.

Furthermore, the amendment of 28 May 2020 introduced an obligation to re-report cross-border schemes which were first implemented between 25 June 2018 and 30 June 2020.

At the same time, in accordance with the Ordinance of the Minister of Finance of 30 June 2020, the deadlines for the implementation of the obligation to re-report cross-border schemes were set as follows:

• until 31 December 2020 for promoters;
• until 31 January 2021 for beneficiaries;
• until 28 February 2021 for supporters.

The Ordinance also extends the deadlines for reporting cross-border schemes for the first time, i.e. when the reporting obligation arises or will arise by 31 December 2020). In this case, the reporting deadlines will start from 1 January 2021.

Additionally, the obligation to submit MDR-3 and MDR-4 information on cross-border tax schemes was extended until 30 April 2021.

Moreover, the aforementioned amendment of 28 May 2020 introduced an obligation for supporters to provide information on the cross-border tax scheme retrospectively if the first implementation activity took place after 25 June 2018. Until now, the retrospective reporting obligation concerned only promoters and beneficiaries.

Who is obliged to report MDR tax schemes?

• Beneficiary - is an entity to which the agreement is made available or for which the agreement is implemented.
• Promoter - is an entity which develops an arrangement that may satisfy the conditions for being recognised as a tax scheme.
• Supporter - is an entity which provides assistance, support or advice concerning the development, marketing, organisation, making available an arrangement to be implemented or supervising its implementation.

Sanctions

Failure to report or other non-compliance with the reporting of the tax schemes may result in the following sanctions:

• up to PLN 20 million with respect to entities responsible for reporting,
• up to PLN 2 million additionally for the Promoter for the lack of internal procedure.

Reporting MDR - how can we help?

• Tax schemes identification.

Assistance in identifying transactions/events taking place after 25 June 2018 which may constitute a tax scheme.  

• Developing internal due diligence procedure.

The procedure will enable the ongoing identification of the tax arrangements to be reported as a tax scheme in terms of the MDR regulation (objective: to minimise the risk associated with the failure to report a scheme allowing the audit to prove that all reasonable measures have been taken to prevent violations).

• Employee trainings.

Trainings for employees who may participate in tax schemes as defined by the MDR legislation in terms of identifying them.

• Support in tax schemes reporting.
• Drafting the internal procedure for promoters according to Article 86l of the Polish Tax Ordinance.