Conclusions from the review of the safeguard opinions issued to date
Obtaining a collateral opinion provides a guarantee to the taxpayer that the events covered by the opinion will not be recognized in the course of potential tax proceedings as activities that may be covered by a circumvention clause. As of the beginning of 2023, the Head of KAS has issued about 70 protective opinions and about 20 notices of refusal to issue a protective opinion, so statistically there is a good chance of obtaining a positive decision.
The issues most frequently asked by taxpayers are the following:
- Restructuring (conversion of a general partnership into a limited partnership)
For example, in a hedging opinion dated November 4, 2022 (Ref.: DKP1.8082.3.2022), the Head of KAS held that the conversion of a general partnership into a limited partnership is not a circumvention of the law. In the opinion issued, the tax benefit in the form of lowering the tax liability of a general partnership partner in terms of solidarity contribution was assessed – after the transformation, the income of the limited partnership will not be included in the basis for its calculation, due to the change in the nature of income, i.e. it will no longer constitute income from business activity, but from participation in the profits of a legal entity. The head of the KAS, in the opinion in question, indicated that the planned transformation does not meet all the prerequisites for recognizing an activity as a tax avoidance activity. The tax authority argued that the transformation of a company is a typical event, a standard way of making a change in the form of business used on the market.
2. Reduction of depreciation rates
In turn, in a safeguard opinion dated August 27, 2021. (Ref: DKP1.8011.17.2021), the Head of KAS stated that reducing depreciation rates during the period of receiving public assistance does not constitute tax avoidance. The opinion issued indicated that tax depreciation scheduling is a way to manage a company’s tax costs, since by simply choosing the depreciation method that is most suitable for it, the taxpayer gains the ability to influence the amount of tax burden – delaying or accelerating the moment of showing taxable income – which can ultimately influence the postponement of the tax liability or reduction of its amount, or the creation or overstatement of a tax loss.
3. Simplifying the ownership structure
In a safeguard opinion dated April 8, 2021. (Ref: DKP3.8011.27.2020), the Head of KAS indicated that increasing the share capital, having a new shareholder join the company and then redeeming the shares does not constitute tax avoidance. The tax authority stated that, although the transaction will result in a tax benefit under Article 119a of the Tax Ordinance, the other conditions referred to in the aforementioned regulation will not be met. The head of KAS agreed with the taxpayer’s argument that the division of the group’s activities at the ownership level will contribute to the creation of a simplified capital structure and allow more efficient management of the companies, so the resulting tax benefit will not be the main or one of the main reasons for restructuring.
4. Cross-border merger
The head of KAS, in a safeguard opinion dated April 30, 2020. (Ref: DKP2.8011.20.2019) took the position that the acquisition of a foreign company based in another EU country by a Polish company does not bear the hallmarks of artificial optimization. The tax authority supported the taxpayer’s position that there is indeed an economic purpose behind the planned cross-border merger, and not tax considerations. The opinion confirmed that the overriding purpose of this merger will be to align the corporate structure of the capital group with the currently operating structure, to ensure a consistent image of the group, to achieve savings from the merger by reducing the operating costs of the capital group and one of the companies.
Considering the examples of collateral opinions cited above, one can see the reasonable approach of the Head of KAS, who strives to carefully analyze each premise and the economic context of the activities performed. In our opinion, the opinions issued testify to the rational approach of the Head of KAS to business realities as well as to the need for changes with regard to tax settlements.