MDR Box

Report your tax schemes with KR Group

Reporting tax schemes
(MDR – Mandatory Disclosure Rules)

Taxpayers are still not clear on the scope of classification of tax schemes, even though the regulations on Mandatory Disclosure Rules (MDR) have been in force since January 2019. The high fines for noncompliance with reporting requirements and uncertainty of interpretation significantly raise the fiscal, operational and business risks.

Do I need it?

The obligation to report tax schemes applies to you if:
  • You recognize tax-deductible costs for payments with a related entity and the recipient of the payments has its residence, registered office or management in a jurisdiction applying harmful tax competition.
  • You take depreciation or amortization on the same fixed assets or intangibles on which depreciation or amortization is taken in another jurisdiction.
  • You claim protection from double taxation of income or assets in more than one jurisdiction.
  • You have transferred assets, and the remuneration set by the two jurisdictions for tax purposes differs by 25% or more.
  • You have transferred rights to hard-to-value intangibles.
  • You have a non-transparent legal ownership structure or it is hard to identify the beneficial owners.
  • You use simplified methods of applying transfer-pricing regulations introduced unilaterally in a given jurisdiction.
  • Functions, risks or assets are transferred between related entities, impacting the anticipated annual financial result of the transferor.
  • You have evaded reporting duties arising under the Act on Exchange of Tax Information with Other Countries.
 

When do you need support?

  • You have changed your tax rules, e.g. applying the 9% corporate income tax rate instead of the 19% rate.
  • You have changed the treatment of income to another source (e.g. income from non-agricultural business activity has become capital gains, or vice versa).
  • You have encountered a success fee or an obligation to maintain confidentiality on how an arrangement enables achievement of a tax advantage.
  • You have used significantly standardized documentation or structures.
  • You have acquired a loss-making company, discontinued the principal business of the company, and taken advantage of the company’s losses.
  • You have conducted circular transactions involving round-tripping through intermediaries not fulfilling any essential economic functions.
  • You have performed activities that offset or cancel each other out, or lead to a state the same as or similar to the state prior to carrying out such activities.
  • You have recognized tax-deductible costs for payments between related entities, and in the jurisdiction where the recipient has its residence, registered office or management:
    • Corporate income tax is not imposed, or is imposed at a rate of zero or less than 5%.
    • The payments enjoy a complete exemption or are subject to preferential taxation rules.
Not fulfilling MDR obligations can result in financial penalties and even criminal liability. Minimize your risk and contact our experts!

MDR CHECK

  • Unique system which cyclically certifies the occurrence of tax schemes within a company.
  • KR Groups takes responsibility for the constant monitoring of tax schemes occurring within a company.
  • We analyze agreements which may be deemed as tax schemes.
  • We advise on the course of action if tax schemes have occurred within a company.

Sound familiar?

  • Not fulfilling the obligation may result in financial penalties, and even criminal liability.
  • We take full responsibility for identifying tax schemes. Our experts review transaction which may be subject to MDR reporting.
  • Our tested questionnaire is easy and does not demand significant input from your company.
  • The company can focus on conducting business!

Our Offer

MDR analysis of a single transaction
  1. Analysis of a transaction indicated by the client in terms of potential MDR obligations involving lookback or current reporting.
  2. Preparation of a summary of the MDR status of the analysed transaction.
MDR analysis of transactions after 26 June 2018
  1. Analysis of transactions in terms of lookback and current MDR reporting obligations.
  2. Preparation of a summary of the MDR status of the analysed transactions.
Monthly MDR monitoring
  1. Monthly analysis of transactions for the existence of MDR obligations.
  2. Preparation of a written monthly summary.
Mandatory reporting to the National Revenue Administration

Reporting relevant transactions to the Polish tax authorities on behalf of the client (under a power of attorney)

Contact

FAQ

Is it possible to obtain a tax interpretation on MDR obligations?

So far the Director of National Revenue Information has refused to issue individual interpretations on MDR, which has exacerbated taxpayers’ problems classifying their activity for MDR purposes. However, in the judgment of 28 January 2021 (case no. I FSK 1703/20), the Supreme Administrative Court held that tax schemes may be the subject of tax interpretations. Thus hopefully the unfavourable practice of the authority will change in this respect.

Is claiming tax relief or exemptions a tax scheme?

According to the tax clarifications, claiming tax relief or exemptions does not constitute a tax scheme if the main purpose was not to obtain a tax advantage.

Can paying a dividend to a foreign shareholder constitute a tax scheme?

Yes, if the value of the dividend exceeds PLN 25 million.

Can shifting from regular employment to self-employment constitute a tax scheme?

Yes, if a person is hired on the basis of self-employment despite the lack of independence and economic risk, while remaining fully subordinated to a single entity.

Can a change in the form of operating from a company to a partnership constitute a tax scheme?

In the opinion of the tax authorities, such a change can qualify as a tax scheme. However, there are arguments that such a change in form is not a tax scheme.

Potential penalties for non-compliance

The Tax Ordinance provides for sanctions for failure to comply with the MDR regulations. Fines for such infractions as failure to introduce procedures for combating non-reporting of tax schemes by obligated entities can run as high as PLN 10 million.

The Fiscal Penal Code also provides for sanctions. There is a fine (up to PLN 21.6 million) for failure to report a tax scheme, late reporting, or other behaviour covered by Art. 80f of the Fiscal Penal Code. There is also a fine for using an invalid tax scheme number (up to PLN 7.2 million).

Would you like an estimate for one of our services?

Complete the form and we will quickly provide you a preliminary offer

Pursuant to the Personal Data Protection Act of 29 August 1997 (Journal of Laws Dz.U. 2016 item 922, as amended), I consent to receive commercial and marketing information from KR Group sp. z o.o. sp. k. with its registered office at ul. Skaryszewska 7, 03-802 Warsaw, and to introduction into the database and processing by KR Group sp. z o.o. sp. k. of my personal data provided in this form. I also acknowledge that my consent is voluntary and that I have the right to review, correct or remove my data.

Order online advice

Pursuant to the Personal Data Protection Act of 29 August 1997 (Journal of Laws Dz.U. 2016 item 922, as amended), I consent to receive commercial and marketing information from KR Group sp. z o.o. sp. k. with its registered office at ul. Skaryszewska 7, 03-802 Warsaw, and to introduction into the database and processing by KR Group sp. z o.o. sp. k. of my personal data provided in this form. I also acknowledge that my consent is voluntary and that I have the right to review, correct or remove my data.

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