Payment of profits from a Slovak partnership by the end of 2014 without taxation in Poland | CASE STUDY

We have successfully completed a tax case relating to the taxation of the distribution of 2014 profits to our client from a Slovak partnership. The success is twofold, because the decision on discontinuation of the proceedings was issued on the basis of substantive law.

In the final decision, the head of the customs and tax office stated that according to the legal status existing in 2014, provisions of the Polish-Slovak double taxation treaty clearly show that the payment of profit from a Slovak partnership is not subject to taxation in Poland.

At the same time, we would like to draw attention to one very important position of the tax authority. The authority found that with regard to income taxes, "tax authorities, as a rule, have the possibility to challenge tax consequences of activities considered to be an artificial structure constituting an abuse of law, [sic!] by referring to the case law of the Court of Justice of the European Union and applying the general principle of EU law prohibiting practices constituting an abuse of European Union law”.

In the end, these regulations of EU law were not applied in our case, but the position stated should be regarded as, at the very least, worrying. It allows tax authorities to use the law abuse structure as a kind of substitute for the general anti-avoidance clause, also to activities taking place before 2016.

The case was handled by Jacek Olczyk and Mariusz Tkaczyk, GWW partner  and supervisor of the tax planning and income tax practices.