Poland

Mandatory Disclosure Rules (MDR)

The MDR law in Poland, which transposes the Council of the European Union Directive 2018/822 of 25 May 2018, entered into force as of 1 January 2019.

Tax arrangements subject to the reporting obligation include cross-border arrangements within the meaning of the DAC6 Directive other arrangements, including domestic arrangements. The Polish MDR legislation has much wider scope compared to the DAC6 Directive, containing, in particular, an extended definition of reportable tax arrangements (not only cross-border but also domestic tax arrangements) and a wider definition of covered taxes, including domestic VAT.

Polish MDR legislation listed 24 hallmarks indicating potential risk of tax avoidance. Only 11 out of them require existence or suspicion of tax benefit, the remaining ones require reporting in any case. Polish MDR regulation requires the reporting of:

• cross-border tax schemes, in relation to which the first activity related to their implementation was made after 25 June 2018, and
• domestic tax schemes, in relation to which the first activity related to their implementation was made after 1 November 2018.

Reporting obligation regarding tax schemes arises within 30 days from the date the scheme is shared or implemented. 

Please note the deadlines for reporting domestic tax schemes have been suspended since 14 March 2020 as a consequence of the state of epidemic threat and the state of epidemic in force in Poland in connection with COVID-19. Due to the fact that the state of epidemic did not apply anymore and the state of epidemic threat was cancelled as from 1 July 2023, the previously extended or suspended reporting deadlines have begun to expire after 30 days from that date (some entities were required to report as early as 1 August 2023).

Failure to report or other non-compliance may be connected with fines:

• up to PLN 10 million regarding an entity being a promoter, and
• with regard to individuals responsible for such non-compliance - up to the maximum threshold of 720 daily rates, which translates into the maximum possible penalty:
• up to PLN 40,723,200 for the period between 1 January 2024 and 30 June 2024, and
• up to PLN 41,279,040 for the period between 1 July 2024 and 31 December 2024 (the amount range of a single daily rate is related to the amount of the minimum wage, which has recently been increasing on a semi-annual basis).

Taxpayers whose revenue or costs exceed the amount of PLN 8 million in the previous tax year may be required to introduce an internal procedure regarding fulfilment of obligations resulting from the implementation of DAC6 until the end of 2018; otherwise, they risk a penalty in the amount up to PLN 2 million.

Please also note that pursuant to Polish MDR rules, a tax scheme should be identified, inter alia, in case of payments, recognised as tax deductible costs, made to a related entity with its registered office, management board, or place of residence in a country applying harmful tax competition (including those indicated in the EU list of non-cooperative jurisdictions for tax purposes), while the occurrence of a tax advantage or the value of the transaction remains irrelevant in such a case. On 14 February 2023, the Russian Federation was included in the EU list of non-cooperative jurisdictions for tax purposes (the so-called blacklist of tax havens) adopted by the Council of the European Union. Thus, any transactions with related entities based in Russia should be identified as cross-border tax schemes.

Limitation for cash payments 

A company cannot settle payments to another entrepreneur in cash if the one-off transaction value exceeds the equivalent of gross PLN 15,000. The limit applies to the value of the transaction, regardless of the number of payments made as part of the transaction. The one-off transaction value is the entire value of the receivables or liabilities expressed in money, resulting from the paid delivery of goods or the paid provision of services specified in a contract concluded between entrepreneurs.

If the price is specified in a foreign currency, the transaction value is calculated on the basis of the central bank exchange rate on the business day preceding the transaction date.

In addition, payments above PLN 15,000 to another entrepreneur who is an active VAT payer should be made to their bank account verified on the White List of VAT payers (see the Other taxes section).

Violation of the limit for cash payments results in exclusion of such a payment (the entire amount is paid without the bank account) from tax deductible costs of a buyer.

Entrepreneurs registered outside Poland, but providing services in the territory of Poland, do not have to apply a cash payment limit. However, this only applies to those situations in which the activity of a foreign entrepreneur may be considered as cross-border provision of services. If a foreign entrepreneur was required to register a branch in Poland and did not do so, the transaction exceeding the statutory limit should be paid in a non-cash form.

In payment transactions in which the parties are the entrepreneur and the consumer, it is the consumer who decides in what form the consumer wants to pay: in cash or non-cash. 

From 1 January 2022, entrepreneurs who are required to record sales with a cash register must allow consumers to pay without using cash, using a payment instrument. Entrepreneurs must provide such a possibility in every place where they carry out their activity.

United States Foreign Account Tax Compliance Act (US FATCA)

On 2 April 2014, the US Treasury announced that an intergovernmental agreement (IGA) was ‘in effect’ and, on 7 October 2014, the US Treasury and Poland signed and released the IGA. As of 4 May 2015, the President has signed the bill, which confirmed IGA ratification.

Multilateral Instrument to Modify Bilateral Tax Treaties (MLI)

The MLI globally implements mechanisms created to prevent international profit shifting to locations where they are subject to reduced taxation or non-taxation. 

Poland was the third country (after Austria and Isle of Man) to ratify the MLI. The Act on ratification of the MLI was published in the official Journal of Laws on 14 November 2017. Poland declared 78 DTTs for the MLI’s purposes. Among declared DTTs, there are DTTs with: Austria, Belgium, Canada, Cyprus, Denmark, France, Holland, Ireland, Luxembourg, Malta, Mexico, Norway, Sweden, and the United Kingdom. Currently, it is assumed that the MLI will not cover DTTs concluded with 11 jurisdictions: Algeria, Georgia, Germany, Guernsey, Isle of Man, Jersey, Montenegro, Nigeria, the United States, Uruguay, and Zambia. 

Poland's approach with regard to the scope of the adopted MLI provisions includes (in addition to the regulations that constitute the minimum standard) inter alia: rules for limiting the use of hybrid mismatches, determining the tax residence of dual resident entities, changing the method of avoiding double taxation (tax exemption method with progression to the credit method), the real estate clause, and cooperation between states regarding the adjustment of profits of related entities.